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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER: 0-19922
THE BISYS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 13-3532663
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
150 CLOVE ROAD 07424
LITTLE FALLS, NEW JERSEY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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973-812-8600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
(TITLE OF CLASS)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.02 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Rule
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. [ ]
State the aggregate market value of voting stock held by nonaffiliates of
the Registrant as of September 17, 1999: $1,206,368,891.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of September 17, 1999: 27,238,659 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE: List the following documents if
incorporated by reference and the part of the Form 10-K into which the document
is incorporated: (1) Any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.
Fiscal 1999 Annual Report to Shareholders -- Part II and IV; Proxy Statement for
November 12, 1999 Annual Meeting -- Part III
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THE BISYS GROUP, INC.
FORM 10-K
JUNE 30, 1999
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PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 14
Item 3. Legal Proceedings........................................... 14
Item 4. Submission of Matters to a Vote of Security Holders......... 14
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 14
Item 6. Selected Financial Data..................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 15
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 15
Item 8. Financial Statements and Supplementary Data................. 15
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 16
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 16
Item 11. Executive Compensation...................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 16
Item 13. Certain Relationships and Related Transactions.............. 16
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 16
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PART I
ITEM I. BUSINESS.
The BISYS(R) Group, Inc. and its wholly-owned subsidiaries ("BISYS" or the
"Company") supports more than 9,000 financial institutions and corporate clients
through its integrated business units. BISYS provides technology outsourcing,
check imaging applications and brokerage services to more than 1,000 financial
institutions nationwide; distributes and administers over 60 families of mutual
funds consisting of more than 500 portfolios; provides retirement plan record
keeping services to over 7,000 companies in partnership with many of the
nation's leading bank and investment management companies; and provides
insurance distribution solutions, professional certification training and
continuing professional education, enterprise-wide networking services, and
loan/deposit product pricing research.
BISYS seeks to be the single source of all relevant outsourcing solutions
for its clients and to improve their performance, profitability and competitive
position. BISYS endeavors to expand the scope of its services through focused
account management, emphasizing services with recurring revenues and long-term
contracts. BISYS increases its business base through (i) direct sales to new
clients, (ii) sales of additional products and services to existing clients, and
(iii) acquisitions of businesses that provide complementary outsourcing
solutions to financial organizations and other customers.
BISYS was organized in August 1989 to acquire certain banking and thrift
data processing operations of Automatic Data Processing, Inc. ("ADP"). Its
traditional business was established in 1966 by United Data Processing, Inc.,
the predecessor of the banking and thrift data processing operations of ADP.
Together with its predecessors, BISYS has been providing outsourcing solutions
to the financial services industry for more than 30 years. BISYS is incorporated
under the laws of Delaware and has its principal executive office at 150 Clove
Road, Little Falls, New Jersey 07424 (telephone 973-812-8600).
Since its founding in 1989, BISYS has completed a number of acquisitions as
part of its strategic growth plan. Over the past five fiscal years, BISYS
acquired the following businesses:
March 1995 -- Concord Holding Corporation, now part of BISYS Fund
Services, creates, markets and administers proprietary mutual funds,
primarily for banks;
May 1995 -- Document Solutions, Inc., now known as BISYS Document
Solutions, offers check and document imaging solutions to banks;
April 1996 -- Strategic Solutions Group, Inc., subsequently renamed
BISYS Creative Solutions, Inc., a provider of automated telephone and
Internet based marketing services. In June 1999, BISYS sold the outstanding
capital stock of BISYS Creative Solutions, Inc. to an unaffiliated third
party;
June 1996 -- T.U.G., Inc., now known as BISYS Insurance Services,
provides insurance distribution services to the financial services
industry;
August 1997 -- Charter Systems, Inc., subsequently renamed BISYS
Networking Services, Inc., an enterprise-wide network services company
which provides network planning, design, implementation and 24-hour
monitoring and performance analysis for multi-vendor local and wide area
network environments;
August 1997 -- Dascit/White & Winston, Inc. and affiliated companies,
now part of BISYS Insurance Services, an outsourcer of group health care
and life insurance services;
September 1997 -- Benefit Services, Inc., now part of BISYS Insurance
Services, an outsourcer of long-term health care insurance services;
May 1998 -- Underwriters Service Agency, now part of BISYS Insurance
Services, a provider of insurance distribution services;
July 1998 -- Corelink Resources Inc., and affiliated entities, now
known as BISYS Brokerage Services, a distributor and marketer of investment
products and services;
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August 1998 -- The Potomac Group, now part of BISYS Insurance
Services, a distributer of life insurance products and services;
September 1998 -- Greenway Corporation, a check imaging software
provider, now part of BISYS Document Solutions;
April 1999 -- EXAMCO, Inc. ("EXAMCO"), now part of BISYS Education
Services, a provider of internet-based professional certification training
and continuing education for the financial services industry;
April 1999 -- Poage Insurance Services, Inc. and an affiliated entity,
now part of BISYS Insurance Services, an independent life insurance
distributor serving the western United States;
April 1999 -- Mutual fund administration business of Bachmann Asset
Management Limited, a provider of mutual fund administration services in
Guernsey, Channel Islands;
May 1999 -- HML, Inc. ("HML"), the parent company of Dover
International, and affiliated entities, now part of BISYS Education
Services, a provider of professional certification training, continuing
education and other support services for the financial services industry;
and
June 1999 -- The Retained Asset Account division of State Street Bank
& Trust Company, now part of BISYS Information Solutions, a provider of
retained asset services to life and property and casualty insurance
companies.
COMPANY STRATEGY
Financial organizations today are challenged to compete more effectively,
improve productivity and maximize profits during periods of both economic growth
and decline. BISYS provides viable alternatives for automating critical tasks
and functions and provides specific expertise and experience to financial
organizations. BISYS outsourcing solutions deliver to its clients operational
and economic benefits as well as additional resources to generate incremental
revenues.
BISYS objectives are to increase its client base and to expand the services
it offers to them. BISYS seeks to be the premier, full-service outsourcing
business partner focused on enhancing its clients' growth, profits and
performance, and building shareholder value by consistently increasing both
revenues and earnings per share, through a combination of internal growth, new
sales and strategic acquisitions. Five key principles have guided BISYS since
its formation and continue to shape its business growth plan:
FOCUS ON SERVING CLIENTS. BISYS seeks to strengthen its long-term
business partnerships by offering new products and services that enable its
clients to grow. BISYS's technologically enhanced solutions are designed to
improve its clients' performance and their competitive position in response
to changing market demands.
GROW INTERNALLY AND SELL AGGRESSIVELY. BISYS seeks to grow internally
by aggressively selling services to new clients and cross-selling
additional services to existing clients through focused sales in growth
markets. BISYS also seeks to develop and sell new services and products to
clients that help them retain existing customers, and attract additional
customers from new markets. BISYS seeks to grow with and profit from its
clients as a growth-focused business partner.
EXPLOIT BUSINESS AND PRODUCT SYNERGY. BISYS seeks to capitalize on
the synergies among its business units and to acquire complementary
companies that support its client relationships and long-term business
objectives. Strategic acquisitions represent an important growth tool for
BISYS. To enhance shareholder value, BISYS seeks to combine conservative
valuation discipline and transition experience to achieve market synergies
and operating leverage.
LEVERAGE TECHNOLOGICAL ADVANCEMENTS. BISYS seeks to maintain its
leadership position in providing competitive, value-added outsourcing
solutions through investment in new technology and the further integration
of BISYS system capabilities.
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OPTIMIZE HUMAN RESOURCES. BISYS seeks to attract and retain
executives, technical staff and financial services professionals with the
expertise required to enable BISYS to explore and develop new opportunities
that will sustain its growth and market leadership position.
BISYS provides its products and services principally through three major
business groups: BISYS Information Services, BISYS Investment Services and BISYS
Insurance & Education Services.
BISYS INFORMATION SERVICES
BISYS provides outsourcing solutions for information processing to banking
institutions through an integrated family of services and products offered under
the registered service mark TOTALPLUS. Although the TOTALPLUS family of services
and products are adaptable to most financial institutions, BISYS believes that
its primary market consists of banks with $250 million to $10 billion in assets.
Using integrated central and client site solutions, the TOTALPLUS product
line supports most aspects of a banking institution's automation requirements.
The TOTALPLUS Solution is a comprehensive system, providing bank-wide automation
which enables community banks more effectively to compete with super regionals,
banks serving a national marketplace, and non-bank competitors. The TOTALPLUS
family of products and services provides bank-wide automation, integrating
mainframe-based, central site and PC-based, client site applications. During
fiscal year 1998, BISYS launched the banking industry's first true client/server
outsourcing alternative based on an open computing environment. BISYS also
introduced full-service Internet banking, utilizing network computing
technologies. The TOTALPLUS solution provides diverse financial organizations
with the ability to customize each application to meet specialized processing
requirements and priorities.
BISYS currently has two major data processing centers located in the
Chicago, Illinois and Philadelphia, Pennsylvania metropolitan areas. These
regional service centers are uniformly automated with multi-tasking IBM (or
equivalent) mainframe computer systems on which all TOTALPLUS host computer
functions and client data are resident. Each client's individual operating
parameters and data are maintained separately, and extensive precautions are in
place to ensure data security and privacy of communications between the client
and the host. Both internal and external backup resources are maintained and
regularly tested for BISYS' own disaster recovery purposes.
With the acquisition of the Retained Asset Account business of State Street
Bank & Trust in June 1999, BISYS has expanded its data processing services to
include servicing the retained asset programs of insurance companies. This data
processing will be performed on the TOTALPLUS host computer system.
BISYS is a leader in providing image-based technology software to financial
institutions, including sophisticated Internet-based delivery and access
solutions. These imaging solutions convert traditional paper-based checks and
other documents into digital images that can be accessed electronically. More
than 900 banks, credit unions and service bureaus are using BISYS image-based
technology software representing approximately 70% of all bank check imaging
systems in the country for the community bank market. This software, designed to
provide a fully integrated image environment, uses microcomputer technology and
supports the majority of image enabled transports available today. This product
family includes image capture and archive, image statements, image proof of
deposit, return item/image processing, image signature verification, courtesy
amount recognition, CD-ROM image delivery, customer financial analysis and full
Internet access.
BISYS provides a complete package of enterprise-wide network management
solutions including planning, design and implementation of multi-vendor network
environments. Its services include its Inframax(R) remote network monitoring and
management system which supervises the network and the operating system and
related software that resides on the network. This automated round-the-clock
service provides monitoring, fault identification and anticipation and overall
network performance reporting.
BISYS gathers information on deposit, consumer and mortgage loan products,
and indirect lending rates offered by more than 5,000 banks, thrifts, credit
unions and captive finance companies on a daily, weekly, or monthly basis. BISYS
markets and transmits this information in various formats and frequencies to
over 1,500
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client institutions, including 23 of the nation's top 25 commercial banks (based
on total assets). This data is used by both money center and community banks to
support their daily pricing decisions.
BISYS INVESTMENT SERVICES
BISYS Investment Services provides distribution, administration, fund
accounting and transfer agency services to over 60 mutual fund complexes
encompassing more than 500 individual portfolios with a market value exceeding
$250 billion in assets. In addition, BISYS provides administration, distribution
and marketing of investment products for financial institutions. BISYS also
provides 401(k) plan marketing support, administration and recordkeeping
services to many of the nation's leading bank and investment management
companies.
BISYS distributes and administers proprietary open-end "mutual funds"
registered under the Investment Company Act (the "Investment Company Act").
BISYS provides distribution services, including the development of joint and
external sales and marketing programs and administrative services, including
responsibility for administration, transfer agency, shareholder services,
compliance and fund accounting. BISYS also provides distribution services
through its various wholly-owned broker/dealer subsidiaries. In order to assist
its clients' mutual fund sales efforts, BISYS maintains a distribution sales
force to raise additional assets for its clients' funds.
BISYS integrates its banking and mutual fund expertise to provide a wide
array of specialized services, including sweep and wrap account processing. More
than a traditional administrator and distributor, BISYS takes a consultative
approach to its client relationships, offering innovative, fee-generating and
cost-effective solutions to expand and manage the banking institution's mutual
fund business. BISYS offers its clients a complete turnkey outsourcing solution
for mutual fund operations which includes comprehensive marketing, institutional
sales, retail sales, telemarketing, development of new products and markets and
institutional and retail shareholder servicing centers. BISYS designs, plans and
implements strategies to help mutual funds attain critical mass, reach new
prospects and markets and add value in an increasingly competitive market. In
addition to its domestic business, BISYS provides distribution and
administrative services to offshore fund complexes through its Dublin, Ireland,
London, England and Guernsey, Channel Islands operations.
BISYS provides 401(k) plan services for small- and medium-sized companies,
providing outsourcing solutions to financial organizations and corporate clients
for marketing and sales support and administration and participant recordkeeping
services for corporate sponsored 401(k) plans. BISYS maintains partnerships with
financial organizations including banks and investment and insurance companies
and provides marketing and proposal support for their sale of their 401(k) plan
investment products. BISYS markets to and builds systems linkage with these
investment manager partners and enables them to concentrate on selling 401(k)
plans while BISYS provides the administrative and recordkeeping functions for
the fund sponsor. On an ongoing basis, BISYS performs 401(k) participant
recordkeeping and other services including daily valuation of participant
balances, administering 401(k) loans, discrimination testing, participant
statements and participant communications. Targeted at companies with fewer than
500 employees -- one of the fastest growing segments of the retirement plan
market -- BISYS services more than 7,000 corporate-sponsored retirement plans
covering more than 750,000 employee participants.
BISYS acts as a comprehensive administrator, distributor and marketer of a
variety of investment products and services. This division supports the
investment programs of more than 120 financial organizations and clears
transactions for more than 1,500 mutual funds, provides support for multi-fund
wrap accounts and provides third party marketing of brokerage and specialized
insurance products to financial institutions.
BISYS INSURANCE AND EDUCATION SERVICES
BISYS provides outsourcing services for the distribution of life insurance,
annuities, group health and long-term care products. BISYS is a full-service
distributor and administrator of insurance services and employs strategic
alliances with major insurance companies and national producer groups to provide
a full range of outsourcing services for insurance product distribution. BISYS
services a network of, and markets products and services through, more than
75,000 insurance agents and brokers nationwide. BISYS offers a
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full-service, single source solution to support banks' and other financial
institutions' initiatives to offer insurance services to their customer bases.
BISYS allows clients to use their various distribution channels to offer
insurance products and services, ranging from annuities and commodity term
products to estate planning products. In addition to product solutions, BISYS
provides clients with the systems and services expertise necessary to support
their sale of insurance products, including licensing management, marketing and
proposal support, application processing and advanced underwriting and
commission accounting and processing.
BISYS provides comprehensive training and education programs to more than
3,500 corporate clients to enable securities brokers, insurance agents and
securities traders to obtain initial licensure, advanced designations
(including, among others, Chartered Life Underwriter, Chartered Financial
Consultant, Certified Financial Planner and Chartered Financial Analyst) and
continuing education programs.
CONTRACTS
Services are provided to BISYS clients, for the most part, on the basis of
contracts which renew for successive terms, unless terminated by either party.
Contracts for distribution services to mutual funds, as required by the
Investment Company Act, provide that such contracts may continue for a period
longer than two years only if such continuance is specifically approved at least
annually by both a majority of the disinterested directors and either the other
members of the board of directors or the holders of a majority of the
outstanding shares of the fund.
BISYS fee structure for data processing clients is based primarily on
number of accounts, loans, participants and/or transactions handled for each
service, in some cases, subject to minimum charges, plus additional charges for
special options, services and features. BISYS fee structure for mutual fund
services clients is based primarily on the average daily net asset value of the
fund, in some cases, subject to minimum charges. BISYS 401(k) fee structure is
based upon the number of eligible participants in a plan subject to certain
minimums. BISYS check imaging software is licensed subject to a one-time fee
with recurring maintenance fees. BISYS fee structure for networking services is
based on an annual fee for remote monitoring and a one-time fee for project
services. Contracts with insurance carriers providing products for BISYS
customers provide for compensation based on a percentage of premiums paid and
transaction charges and are generally cancellable on less than 90 days notice at
the discretion of the parties. BISYS education services are provided to
customers on an "as-needed" basis pursuant to long-term programs which are, in
some cases, recommended by BISYS to its customers.
Although contract terminations and non-renewals have an adverse affect on
recurring revenues, BISYS believes that the contractual nature of its
businesses, combined with its historical renewal experience, provides a high
level of recurring revenues.
CLIENT BASE
BISYS clients are located in all 50 states and several international
locations, principally the United Kingdom. BISYS provides outsourcing solutions
to commercial banks, mutual savings institutions, thrift organizations, mutual
funds, insurance companies, insurance producer groups, corporate clients and
other financial organizations including investment counselors and brokerage
firms. Total revenue from clients located outside the United States for fiscal
1997, 1998 and 1999, was approximately $1.5 million, $2.0 million and $10.8
million, respectively.
DISASTER RECOVERY SYSTEMS
Where appropriate, BISYS has implemented a disaster recovery system for its
various businesses. The key restoration services include off-site storage and
rotation of critical files, availability of a third-party "hot site" and
telecommunications recovery capability. BISYS believes that its single product
and consistent platform approach to data processing and communications and other
operating procedures enable it to achieve greater efficiencies in maintaining
and enhancing its disaster recovery systems, the capabilities of which are
routinely tested by BISYS with the cooperation of its clients. BISYS has also
developed and markets a
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microcomputer-based client site disaster recovery planning product that is
specifically designed to meet the compliance needs of its financial institution
clients.
YEAR 2000
The Company is addressing the Year 2000 issues associated with its existing
computer systems, software applications, communications systems and other
technology equipment utilizing both internal and external resources to identify
and remediate these matters throughout the organization. The Company has
completed its risk assessment and testing plans for internal mission critical
information systems and continues to remediate other systems that are not
currently Year 2000 ready. The Company has tested substantially all of its
internal mission critical information systems and believes such systems are Year
2000 ready (i.e. that such systems will perform essential functions before and
after December 31, 1999).
The Company uses third party provided software and systems in certain of
its businesses for such tasks as account and information statement processing,
fund accounting and 401(k) plan record keeping. If third parties upon which the
Company depends, including telecommunications and electrical power providers,
are unable to address their Year 2000 issues in a timely manner, it could result
in a material adverse financial risk to the Company. The Company has received
assurances from its suppliers of mission critical systems, software and services
that such systems, software and services are Year 2000 ready.
The Company has projected what it believes to be the most reasonably likely
worst case scenarios related to potential Year 2000 failures and disruptions.
These scenarios include internal computer system failures, failures of third
party provided software and systems. In order to mitigate this risk, the Company
has devoted resources necessary to develop appropriate business continuity
plans. These contingency plans include alternative systems and vendors, disaster
recovery hot sites, alternative power sources and manual processes. Such
contingency plans have been substantially completed. While the Company's
contingency plans are designed to mitigate the effect of Year 2000 failures, any
Year 2000 failure could result in significant business interruption despite the
implementation of contingency plans.
The Company's Year 2000 progress, the testing of remediated software and
contingency plans have been and will continue to be the subject of verification
and validation by the Company's Internal Audit function. Internal Audit reports
on Year 2000 are reviewed by senior management and the Company's Board of
Directors.
The Company believes it has developed an effective plan to address the Year
2000 issues and that, based on information presently available to the Company,
its Year 2000 transition will not have a material effect on its business,
operations or financial results. However, due to the general uncertainty
inherent in the Year 2000 issue, including the readiness of third parties, the
Company is unable to provide assurances whether, or to what extent, failures
associated with the Year 2000 could occur. Any such failures could have a
material adverse impact on the Company's operations, liquidity and financial
condition. The Company has incurred expenditures for Year 2000 testing and
remediation of approximately $3.0 million in fiscal 1999 and $3.0 million in
fiscal 1998. The Company anticipates expenditures for Year 2000 of approximately
$1.2 million in the first half of fiscal 2000. All Year 2000 expenditures have
been expensed as incurred by the Company.
SALES, MARKETING AND CLIENT SUPPORT
BISYS sells its services directly to potential clients and supports
insurance agents and companies, brokerage firms and other entities in their
endeavors to gain new clients. In addition to direct sales, BISYS utilizes
reseller/distributors to sell its software. BISYS has a number of sales offices
located throughout the United States.
BISYS utilizes an account executive staff which provides client account
management and support. In accordance with BISYS strategy of providing a single
source solution to its clients, the account executive staff also markets and
sells additional services to existing clients and manages the contract renewal
process. Using centralized resources, BISYS provides its direct sales staff and
account executives with marketplace data, presentation materials and
telemarketing data. BISYS maintains client support staff at its principal
locations,
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which is responsible for day-to-day interaction with clients and also markets
BISYS products and services to existing clients.
COMPETITION
BISYS believes the market for its services is highly competitive. BISYS
believes that it remains competitive due to several factors, including BISYS'
overall company strategy and commitment, product quality, reliability of
service, a comprehensive and integrated product line, timely introduction of new
products and services, and competitive pricing. BISYS believes that, by virtue
of its range of product and service offerings and its overall commitment to
client service and relationships, it competes favorably in these categories. In
addition, BISYS believes that it has a competitive advantage as a result of its
position as an independent vendor, rather than as a cooperative, an affiliate of
a financial institution, a hardware vendor or competitor to its clients.
BISYS principal competitors are independent vendors of computer software
and services, in-house departments, affiliates of financial institutions or
large computer hardware manufacturers, processing centers owned and operated as
user cooperatives, insurance companies, third party administration firms, mutual
funds companies and brokerage firms. BISYS believes that no single competitor
offers the full range of products and services that are offered by BISYS.
Specific competitors include: Fiserv and M&I Data Services for the Information
Services group; First Data, PNC Bank Corp., State Street Bank & Trust Company,
Federated Investors and SEI Corporation for the Investment Services group; and
Ascensus, Ash Brokerage, FiServ, Pictorial and Dearborn Financial Publishing for
the Insurance & Education Services group.
RESEARCH AND DEVELOPMENT
In order to meet the changing needs of the financial organizations that it
serves, BISYS continually evaluates, develops, maintains and enhances various
application software and other technology used in its business. During fiscal
1997, 1998 and 1999, BISYS spent approximately $10.4 million, $11.7 million and
$11.5 million, respectively, on research and development, primarily focused on
its proprietary systems. Most of BISYS central site application software used in
its bank data processing business has been developed internally, and a majority
of the client site application software is licensed from third parties and
integrated with BISYS' existing systems.
PROPRIETARY RIGHTS
BISYS regards certain of its software as proprietary and relies upon trade
secret law, internal nondisclosure guidelines and contractual provisions for
protection. Other than one patent relating to its check imaging system, BISYS
does not hold any registered patents or registered copyrights on its software.
BISYS believes that legal protection of its software is less significant than
the knowledge and experience of BISYS management and personnel and their ability
to develop, enhance and market new products and services. BISYS believes that it
holds all proprietary rights necessary for the conduct of its business.
Application software similar to that licensed by BISYS is generally
available from alternate vendors, and in instances where BISYS believes that
additional protection is required, the applicable license agreement provides
BISYS with the right to obtain the software source code upon the occurrence of
certain events.
GOVERNMENT REGULATION
Certain BISYS subsidiaries are registered as broker/dealers with the
Securities and Exchange Commission (the "SEC"). Much of the federal regulation
of broker/dealers has been delegated to self-regulatory organizations,
principally the National Association of Securities Dealers, Inc. (the "NASD")
and the national securities exchanges. broker/dealers are subject to regulation
which covers all aspects of the securities business, including sales methods,
trading practices, use and safekeeping of customers' funds and securities,
capital structure, recordkeeping and the conduct of directors, officers and
employees. Additional legislation, changes in rules and regulations promulgated
by the SEC, the Municipal Securities Rulemaking Board, the Office of the
Comptroller of the Currency ("OCC"), the Federal Deposit Insurance Corporation
("FDIC"),
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the Federal Reserve Board (the "FRB") and the self-regulatory organizations or
changes in the interpretation of enforcement of existing laws, rules and
regulations, may also directly affect the mode of operations and profitability
of broker/dealers. The SEC, the FRB, the self-regulatory organizations, state
securities law administrators, the OCC and the FDIC may conduct regulatory
proceedings for violations of applicable laws, rules and regulations. Such
violations can result in disciplinary actions (such as censure, the imposition
of fines, the issuance of cease-and-desist orders or the suspension or
revocation of registrations, memberships or licenses of a broker/dealer or its
officers, directors or employees), as well as civil and criminal penalties. The
principal purpose of such regulations generally is the protection of the
investing public and the integrity of securities markets, rather than protection
of securities firms or their creditors or stockholders.
In addition, BISYS broker/dealer subsidiaries are subject to SEC Rule
15c3-1 (commonly known as the "Net Capital Rule"). The Net Capital Rule, which
specifies the minimum amount of net capital required to be maintained by
broker/dealers, is designed to measure the general financial integrity and
liquidity of broker/ dealers and requires that a certain part of broker/dealers'
assets be kept in relatively liquid form. Failure to maintain the required
minimum amount of net capital may subject a broker/dealer to suspension or
revocation of licenses, registration or membership with the New York Stock
Exchange, Inc., the SEC, the NASD, and various state securities law
administrators and may ultimately require liquidation of the broker/dealer.
Under certain circumstances, the Net Capital Rule also prohibits payment of cash
dividends, redemption or repurchase of stock, distribution of capital and
prepayment of subordinated indebtedness. Thus, compliance with the Net Capital
Rule could restrict BISYS ability to withdraw capital from its broker/dealer
subsidiaries. At June 30, 1999, each BISYS broker/dealer subsidiary met or
exceeded the requisite net capital requirement. At June 30, 1999, the BISYS
broker/dealer subsidiaries had aggregate net capital of approximately $9.5
million, which exceeded the requirements of the Net Capital Rule by
approximately $7.0 million.
Under the Investment Company Act of 1940, the distribution agreements
between each mutual fund and a BISYS subsidiary terminate automatically upon
assignment of the agreement. The term "assignment" includes direct assignments
by BISYS as well as assignments which may be deemed to occur, under certain
circumstances, upon the transfer, directly or indirectly, of a controlling block
of BISYS voting securities. The Investment Company Act of 1940 presumes that any
transfer of more than 25% of the voting securities of any person represents a
transfer of a controlling block of voting securities.
As a provider of services to banking institutions, BISYS is not directly
subject to federal or state banking regulations. However, BISYS may be subject
to review from time to time by the FDIC, the National Credit Union Association,
the Office of Thrift Supervision, the OCC and various state regulatory
authorities. These regulators make certain recommendations to BISYS regarding
various aspects of its operations. In addition, BISYS processing operations are
reviewed annually by an independent auditing firm.
Banks and other depository institutions doing business with BISYS are
subject to extensive regulation at the federal and state levels under laws,
regulations and other requirements specifically applicable to regulated
financial institutions, and are subject to extensive examination and oversight
by federal and state regulatory agencies. As a result, the activities of BISYS
client banks are subject to comprehensive regulation and examination, including
those activities specifically relating to the sale by or through them of mutual
funds and other investment products. BISYS is not presently aware of any facts
which would lead it to believe that any of its bank clients are not in
compliance with applicable federal and state laws, regulations and other
requirements concerning the administration and distribution of bank managed
mutual funds.
In this regard, the Glass-Steagall Act has been applied to prohibit banks
from engaging in the organization, sponsorship, underwriting and principal
distribution of mutual funds, but not to prohibit banks from providing
investment advisory, administrative, selling and other related services for, to
or with respect to the sale of mutual funds shares to their customers. Other
depository institutions laws, regulations and requirements do not impose
substantive limitations of a material nature on the activities which BISYS
client banks now perform with respect to their proprietary and other mutual
funds, but regulate in various respects the manner in which such activities may
be performed. Nevertheless, future changes in the application or the
interpretation of the Glass-Steagall Act or other banking laws and regulations,
or future legislative changes in existing banking laws, may have a material and
adverse impact on the ability of BISYS client banks to engage
9
<PAGE> 11
in mutual fund activities, and consequently on the business relationships
between BISYS and its client banks. BISYS is not presently aware of any pending
regulatory developments, which, if approved, would adversely affect the ability
of its client banks to engage in mutual fund activities. In addition, future
changes in the Glass-Steagall Act may remove the existing prohibition on banks
engaging in the organization, sponsorship, underwriting and principal
distribution of mutual funds, thereby permitting banks to perform certain
functions now required to be performed by third parties such as BISYS. Any such
change could adversely affect BISYS in its business of providing distribution
services by permitting clients to choose to perform distribution functions
independently.
Federal regulatory agencies have promulgated guidelines or other
requirements which apply to depository institutions subject to their respective
supervisory jurisdiction with respect to the sale of mutual funds and other
non-FDIC insured investment products to retail customers. These requirements
apply to, among other things, sales of investment products on bank premises by
or through the use of third-party service providers. These requirements
generally require banking institutions which contract to sell investment
products through the use of third-party service providers to implement
appropriate measures to ensure that such activities are being conducted in
accordance with applicable bank and securities regulatory requirements
(including the agencies' retail sales guidelines), and may in some instances
impose certain "due diligence" obligations on regulated depository institutions
with respect to the nature and the quality of services provided by such third-
party service providers. Such regulatory requirements may increase the extent of
oversight which federal regulatory agencies may require BISYS client banks to
exercise over the activities of BISYS.
Federal and state banking laws grant state and federal regulatory agencies
broad authority to take administrative enforcement and other adverse supervisory
actions against banks and other regulated depository institutions where there is
a determination that unsafe and unsound banking practices, violations of laws
and regulations, failures to comply with or breaches of written agreements,
commitments or undertakings entered into by such banks with their regulatory
agencies, or breaches of fiduciary and other duties exist. Banks engaged in,
among other things, mutual fund-related activities may be subject to such
regulatory enforcement and other adverse actions to the extent that such
activities are determined to be unlawful, unsound or otherwise actionable.
Certain operations of BISYS are subject to regulation by the insurance
departments of the states in which BISYS sells insurance products. Certain BISYS
employees are required to be licensed as insurance producers in certain states.
EMPLOYEES
As of June 30, 1999, BISYS employed approximately 3,100 employees. None of
its employees is represented by a union and there have been no work stoppages,
strikes or organization attempts. BISYS believes that its relations with its
employees are good.
The service nature of BISYS makes its employees an important corporate
asset. Most employees are not subject to employment agreements; however, a
limited number of executives of BISYS operating subsidiaries have such
agreements.
RISK FACTORS
This Form 10-K contains forward-looking statements. These statements are
identified by words like "expect", "should", "could" and "anticipate". Our
actual results could differ materially from these statements due to risks and
uncertainties, including the ones described below.
Changes in the Glass-Steagall Act could adversely impact our business
The Glass-Steagall Act prohibits banks from selling securities. However,
banks are permitted to purchase and sell securities, as agents, upon the order
and for the account of their customers. Banks are also allowed to provide a wide
variety of services to mutual funds, including investment advisory and
administrative services. If current restrictions under the Glass-Steagall Act
were further relaxed and banks were authorized to
10
<PAGE> 12
organize, sponsor and distribute shares of mutual funds, our bank clients could
decide to perform themselves some or all of the services we currently provide to
them. If that were to happen, it could have a material adverse impact on our
business and results of operations.
Direct and indirect governmental regulation can significantly impact our
business
Our business is affected by federal and state regulations. Our
noncompliance with these regulations could result in the suspension or
revocation of our licenses or registrations, including broker/dealer licenses
and registrations and insurance producer licenses and registrations. Regulatory
authorities could also impose on us civil fines and criminal penalties for
noncompliance.
Some of our subsidiaries are registered with the SEC as broker-dealers.
Much of the federal regulation of broker-dealers has been delegated to
self-regulatory organizations, principally the National Association of
Securities Dealers, Inc. and the national securities exchanges. Broker-dealers
are subject to regulations which cover all aspects of their securities business,
including, for example:
- sales methods;
- trading practices;
- use and safekeeping of customers' funds and securities;
- capital structure;
- recordkeeping; and
- the conduct of directors, officers and employees.
The operations of our broker-dealers and their profitability could be
affected by:
- federal and state legislation;
- changes in rules and regulations of the SEC, banking and other regulatory
agencies, and self-regulatory agencies; and
- changes in the interpretation or enforcement of existing laws, rules and
regulations.
Banks and other depository institutions with whom we do business are also
subject to extensive regulation at the federal and state levels under laws and
regulations applicable to regulated financial institutions. They are also
subject to extensive examination and oversight by federal and state regulatory
agencies. Changes in the laws, rules and regulations affecting our client banks
and financial institutions and the examination of their activities by applicable
regulatory agencies could adversely affect our results of operations.
Some of our subsidiaries, and officers and employees of these subsidiaries,
are required to be licensed as insurance producers in various jurisdictions in
which we conduct our insurance services business. They are subject to regulation
under the insurance laws and regulations of these jurisdictions. Changes in the
laws, rules and regulations affecting licensed insurance producers could
adversely affect our operations.
Our revenues and earnings are subject to changes in the stock market
A significant portion of our earnings are derived from fees based on the
average daily market value of the assets we administer for our clients. A sharp
rise in interest rates or a sudden decline in the stock market could influence
an investor's decision whether to invest or maintain an investment in a mutual
fund. As a result, fluctuations could occur in the amount of assets which we
administer. If investors were to seek alternatives to mutual fund investments,
it could have a negative impact on our revenues by reducing the amount of assets
we administer. Also, from time to time, we and our bank clients waive, for
competitive reasons, some fees normally charged to mutual funds.
11
<PAGE> 13
Consolidation in the banking and financial services industry could adversely
impact our business
There has been and continues to be merger, acquisition and consolidation
activity in the banking and financial services industry. Mergers or
consolidations of banks and financial institutions in the future could reduce
the number of our clients or potential clients. A smaller market for our
services could have a material adverse impact on our business and results of
operations. Also, it is possible that the larger banks or financial institutions
which result from mergers or consolidations could decide to perform themselves
some or all of the services which we currently provide or could provide. If that
were to occur, it could have a material adverse impact on our business and
results of operations.
Our acquisition strategy subjects us to risks
In the past several years, we have acquired a number of other companies. We
may make additional acquisitions. We cannot predict if or when any additional
acquisitions will occur or whether they will be successful.
Acquiring a business involves many risks, including:
- incurrence of debt;
- incurrence of unforeseen obligations or liabilities;
- difficulty in integrating the acquired operations and personnel;
- difficulty in maintaining uniform controls, procedures and policies;
- possible impairment of relationships with employees and customers as a
result of the integration of new personnel;
- risk of entering markets in which we have minimal prior experience;
- decrease in earnings as a result of non-cash charges; and
- dilution to existing stockholders from the issuance of our common stock
to make or finance acquisitions.
We do not intend to pay dividends
We have never paid cash dividends to stockholders and do not anticipate
paying cash dividends in the foreseeable future.
Our stock price is volatile
The market price of our common stock has been volatile. From January 1,
1998 to June 30, 1999, the last sale price of our common stock ranged from a low
of $32.50 per share to a high of $59.594 per share.
The market price of our common stock is subject to many factors, including:
- general stock market conditions;
- general United States and worldwide economic conditions;
- conditions in our industries such as competition, demand for services and
technological advances;
- changes in our revenues and earnings;
- changes in analyst recommendations and projections, and
- changes in our client base and our contracts with clients.
12
<PAGE> 14
We face significant competition from other companies
We face significant competition from other companies. Many of our
competitors are well-established companies, and some of them have greater
financial, technical and operating resources than we do. Competition in our
business is based primarily upon pricing, quality of products and services,
breadth of products and services, new product development and the ability to
provide technological solutions.
We depend on key management personnel
Our success depends upon the continued services of our key senior
management personnel, some of whom do not have employment agreements with us.
The loss or unavailability of these individuals could have a material adverse
effect on our business prospects. Our success also depends on our ability to
attract and retain highly skilled personnel in all areas of our business,
including our information processing, fund management and insurance services
businesses. We cannot assure that we will be able to attract and retain
personnel on acceptable terms in the future.
The Year 2000 issue could harm our operations
We are conducting a review of our computer systems and software
applications to identify any systems and applications that could be affected by
the inability of any existing computer systems to process time sensitive data
accurately beyond the year 1999 (referred to as the "Year 2000" issue). We
intend to remediate all significant systems for compliance with the Year 2000
and are also reviewing the adequacy of the process and progress of third party
vendors of systems that may be affected by the Year 2000 issue. We use third
party provided software and computer systems for such tasks as account and
information statement processing, fund accounting, and 401(k) plan
record-keeping. Because of the complexity of the Year 2000 issue and the
interdependence of organizations using various computer systems, we cannot
predict whether our efforts, or those of clients, vendors or other third parties
with whom interact, will be satisfactorily completed in a timely manner. Our
failure to satisfactorily address the Year 2000 issue could have a material
adverse effect on our prospects, business, financial condition and results of
operations. The costs of our Year 2000 efforts are not expected to have a
material adverse effect. However, we cannot assure that we will not experience
costs overruns or delays in connection with our plan for replacing or modifying
systems, which could have a material adverse effect on our prospects, business,
financial condition and results of operations.
Anti-takeover provisions could discourage, delay or prevent a change in
control
We have a shareholder rights plan. Each right entitles the holder of a
share of our common stock to buy one share of our common stock at an exercise
price of $175. If a person or group were to acquire, or to announce the
intention to acquire, 15% or more of our outstanding stock, and in some cases
10%, each right would entitle the holder, other than the acquiring person or
group, to purchase shares of our common stock at the exercise price of the right
with a value of twice the exercise price. This plan could have the effect of
discouraging, delaying or preventing persons from attempting to acquire us.
In addition, the Delaware General Corporation Law, to which we are subject,
prohibits, except under circumstances specified in the statute, a corporation
from engaging in any mergers, significant sales of stock or assets or business
combinations with any stockholder or group of stockholders who own at least 15%
of our common stock.
13
<PAGE> 15
ITEM 2. PROPERTIES.
Other than two office buildings acquired in recent acquisitions, all
principal properties of the Company are leased. The following table provides
certain summary information with respect to such principal properties as of June
30, 1999:
<TABLE>
<CAPTION>
LOCATION FUNCTION SQ. FEET EXPIRATION DATE
- -------- -------- -------- ---------------
<S> <C> <C> <C>
Little Falls, Corporate headquarters 8,459 2000
NJ
Houston, TX Information Services Service Center 58,568 2001
Cherry Hill, Information Services Data processing 35,850 2000
NJ center
Lombard, IL Information Services Data processing 25,240 2000
center
Columbus, OH Investment Services Service Center 126,686 2005
Ambler, PA Investment Services Service Center 69,399 2002
Birmingham, AL Information Services Service Center 22,104 2000
Harrisburg, PA Insurance & Education Services Service 33,982 2007
Center
New York, NY Investment Services and Insurance & 35,897 2008
Education Services Service Center
</TABLE>
In addition to the principal facilities listed above, BISYS also leases
certain other office and data processing facilities with leases expiring
periodically over the next five years.
BISYS owns or leases central processors and associated peripheral equipment
used in its data and item processing operations and communications network,
401(k) business and electronic banking business.
BISYS believes that its existing facilities and equipment, together with
expansion in the ordinary course of business, are adequate for its present and
foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS.
BISYS is involved in litigation arising in the ordinary course of business.
Management believes that BISYS has adequate defenses and/or insurance coverage
against such litigation and that the outcome of these proceedings, individually
or in the aggregate, will not have a material adverse effect upon BISYS
financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders of the Company during
the fourth quarter of fiscal 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Certain of the information required in Item 5 is incorporated herein by
reference to page 36 of the Company's 1999 Annual Report to Shareholders (the
"Annual Report") under the heading "Market Price Information" and Note 4 to the
Company's consolidated financial statements included therein. The Company has
not paid or declared any cash dividends during its most recent two fiscal years.
Portions of the Annual Report incorporated by reference in this report are
included in this report as Exhibit 13.
14
<PAGE> 16
During the fourth quarter of fiscal 1999, the Company issued shares of its
common stock, $.02 par value ("Common Stock"), which were not registered under
the Securities Act of 1933, as amended (the "Securities Act") in certain
acquisition transactions, as follows:
(i) On April 1, 1999, the Company issued an aggregate of 156,985
shares of Common Stock to the stockholders and holders of other equity
interests of EXAMCO in connection with the acquisition of EXAMCO through
the merger of a wholly-owned subsidiary of the Company with and into EXAMCO
(the "EXAMCO Merger"). Of the eight stockholders and equity interest
holders of EXAMCO, one was an accredited investor, three were trusts for
the benefit of the immediate family of such stockholder and the other four
were officers or employees of EXAMCO. There was no underwriter or placement
agent.
In connection with the issuance of shares of Common Stock to the
stockholders and other holders of other equity interests in EXAMCO in the
EXAMCO Merger, the Company relied on an exemption from registration under
Section 4(2) of the Securities Act, based upon, among other things, certain
representations and warranties of the investors, the small number of
investors, the nature of the investors and certain information provided to
the investors with respect to the Company and the EXAMCO Merger.
(ii) On May 28, 1999, the Company issued an aggregate of 190,132
shares of Common Stock to the stockholders of HML, Inc. ("HML"), the parent
company of the Dover entities, in connection with the acquisition of HML
through the merger of a wholly-owned subsidiary of the Company with and
into HML (the "HML Merger"). Of the six stockholders of HML, three were
accredited investors and the other three were officers of subsidiaries of
HML. There was no underwriter or placement agent.
In connection with the issuance of shares of Common Stock to the
stockholders of HML in the HML Merger, the Company relied on an exemption
from registration under Section 4(2) of the Securities Act, based upon,
among other things, certain representations and warranties of the
investors, the small number of investors, the nature of the investors and
certain information provided to the investors with respect to the Company
and the HML Merger.
ITEM 6. SELECTED FINANCIAL DATA.
The information requested in Item 6 is incorporated herein by reference to
page 18 of the Annual Report, included in this report as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required in Item 7 is incorporated herein by reference to
pages 19 through 22 of the Annual Report, included in this report as Exhibit 13.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
BISYS does not have material exposure to market risk from derivative or
non-derivative financial instruments. BISYS does not utilize such instruments to
manage market risk exposures or for trading or speculative purposes. The Company
does, however, invest available cash and cash equivalents in highly-liquid
financial instruments with original maturities of three month or less. As of
June 30, 1999, BISYS had approximately $49.6 million of cash and cash
equivalents invested in highly-liquid debt instruments purchased with original
maturities of three months or less, including $9.9 million of overnight
repurchase agreements. BISYS believes that potential near-term losses in future
earnings, fair values and cash flows from reasonably possible near-term changes
in the market rates for such instruments are not material to BISYS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required in Item 8 is incorporated herein by reference to
pages 23 through 35 of the Annual Report, included in this report as Exhibit 13.
15
<PAGE> 17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS IN ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
Pursuant to Instruction G(3) to Form 10-K, the information required in
Items 10 through 13 is incorporated by reference from the Company's definitive
proxy statement, which is expected to be filed with the SEC pursuant to
Regulation 14A within 120 days after the end of the Registrant's fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The consolidated financial statements of the Company as of June 30, 1999
and 1998 and for each of the three fiscal years for the period ended June 30,
1999, together with the report of PricewaterhouseCoopers LLP dated August 6,
1999, are incorporated herein by reference to pages 23 through 35 of the Annual
Report, included in this report as Exhibit 13.
(a)(2) Financial Statement Schedules
All financial statement schedules are omitted for the reason that they are
either not applicable or not required or because the information required is
contained in the consolidated financial statements or notes thereto.
(a)(3) Reports on Form 8-K
No reports on Form 8-K were filed with the SEC during the quarter ended
June 30, 1999.
(b) Exhibits:
<TABLE>
<CAPTION>
<C> <C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of The
BISYS Group, Inc. (Incorporated by reference to the
Registrant's Registration Statement No. 333-02932.)
3.2 -- Amended and Restated By-Laws of The BISYS Group, Inc.,
(Incorporated by reference to Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for the year ended
June 30, 1997.)
4.1 -- Rights Agreement, dated as of May 8, 1997, by and between
The BISYS Group, Inc. and The Bank of New York, as Rights
Agent (including the form of Rights Certificate as Exhibit
A). (Incorporated by reference to Exhibit 2.1 of Form 8-A
filed on May 8, 1997 with the SEC.)
10.1 -- Letter Agreement dated May 12, 1995 between the Registrant
and Lynn J. Mangum. (Incorporated by reference to Exhibit
10.18 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995, Commission File No.
0-19922.)
10.2 -- Deferred Compensation Plan (Incorporated by reference to
Exhibit 10.2 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998, Commission File No.
0-19922).
10.3 -- Executive Life Insurance Plan (Incorporated by reference to
Exhibit 10.3 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998, Commission File No.
0-19922).
10.4 -- The BISYS Group, Inc. Amended and Restated Stock Option and
Restricted Stock Purchase Plan. (Incorporated by reference
to Exhibit 10.23 to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1994, Commission
File No. 0-19922.)
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
<C> <C> <S>
10.5 -- The BISYS Group, Inc. 1995 Stock Option Plan. (Incorporated
by reference to Exhibit A to the Registrant's proxy
statement for its 1995 annual meeting of stockholders, filed
with the SEC, Commission File No. 0-19922.)
10.6 -- The BISYS Group, Inc. 1996 Stock Option Plan. (Incorporated
by reference to Exhibit A to Registrant's proxy statement
for its 1996 annual meeting of stockholders, Commission File
No. 0-19922.)
10.7* -- BISYS 401(k) Savings Plan.
10.8 -- The BISYS Group, Inc. Non-Employee Directors' Stock Option
Plan, as amended (Incorporated by reference to Exhibit 10.8
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1998, Commission File No.
0-19922).
10.9 -- Lease of Little Falls, New Jersey facility dated January 9,
1991. (Incorporated by reference to Exhibit 10.24 of the
Registrant's Registration Statement No. 33-45417.)
10.10 -- Lease of Cherry Hill, New Jersey facility dated November 29,
1990. (Incorporated by reference to Exhibit 10.25 of the
Registrant's Registration Statement No. 33-45417.)
10.11 -- Lease of Lombard, Illinois facility dated May 29, 1990.
(Incorporated by reference to Exhibit 10.27 of the
Registrant's Registration Statement No. 33-45417.)
10.12 -- Lease of Houston, Texas facility dated June 30, 1986.
(Incorporated by reference to Exhibit 10.28 of the
Registrant's Registration Statement No. 33-45417.)
10.13 -- Lease of Ambler, Pennsylvania facility dated April 4, 1989.
(Incorporated by reference to Exhibit 10.29 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993, Commission File No. 0-19922.)
10.14 -- Lease of Columbus, Ohio facility dated August 30, 1994 as
amended by First Amendment dated April 14, 1995.
(Incorporated by reference to Exhibit 10.36 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1995, Commission File No. 0-19922.)
10.15 -- Lease of New York, New York facility dated February 26, 1998
(Incorporated by reference to Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, Commission File No. 0-19922).
10.16 -- Lease of Harrisburg, Pennsylvania facility dated October 24,
1997 (Incorporated by reference to Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, Commission File No. 0-19922).
10.17* -- Credit Agreement by and among The BISYS Group, Inc., the
Lenders party thereto, The Chase Manhattan Bank, The First
National Bank of Chicago, First Union National Bank and
Fleet Bank, National Association, as co-Agents, and The Bank
of New York, as Administrative Agent, with BNY Capital
Markets, Inc., as Arranger, dated as of June 30, 1999,
without exhibits.
10.18 -- Agreement and Plan of Merger dated as of August 21, 1998, as
amended as of August 31, 1998, among The BISYS Group, Inc.,
BI-Green Acquisition Corp., Greenway Corporation and the
shareholders of Greenway Corporation named therein.
(Incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K for the date
September 16, 1998, Commission File No. 0-19922.)
10.19 -- Amendment No. 1 dated as of August 31, 1998 to Agreement and
Plan of Merger dated as of August 21, 1998, as amended as of
August 31, 1998, among The BISYS Group, Inc., BI-Green
Acquisition Corp., Greenway Corporation and the shareholders
of Greenway Corporation named therein. (Incorporated by
reference to Exhibit 2.2 to the Registrant's Current Report
on Form 8-K for the date September 16, 1998, Commission File
No. 0-19922.)
13* -- Pages 18 - 36 of the Registrant's 1999 Annual Report to
Shareholders.
21* -- List of significant subsidiaries of The BISYS Group, Inc.
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
<C> <C> <S>
23* -- Consent of PricewaterhouseCoopers LLP.
27* -- Financial Data Schedule.
</TABLE>
- ---------------
* Filed herewith.
18
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
The BISYS Group, Inc.
By: /s/ DENNIS R. SHEEHAN
------------------------------------
Dennis R. Sheehan
Executive Vice President and
Chief Financial Officer
Date: September 28, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 28th day of September 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ LYNN J. MANGUM Director, Chairman of the Board, President
- --------------------------------------------- and Chief Executive Officer (Principal
(Lynn J. Mangum) Executive Officer)
/s/ DENNIS R. SHEEHAN Executive Vice President and Chief Financial
- --------------------------------------------- Officer (Principal Financial and Accounting
(Dennis R. Sheehan) Officer)
/s/ ROBERT J. CASALE Director
- ---------------------------------------------
(Robert J. Casale)
/s/ THOMAS A. COOPER Director
- ---------------------------------------------
(Thomas A. Cooper)
/s/ JAY W. DEDAPPER Director
- ---------------------------------------------
(Jay W. DeDapper)
/s/ JOHN J. LYONS Director
- ---------------------------------------------
(John J. Lyons)
/s/ THOMAS E. MCINERNEY Director
- ---------------------------------------------
(Thomas E. McInerney)
/s/ JOSEPH J. MELONE Director
- ---------------------------------------------
(Joseph J. Melone)
</TABLE>
19
<PAGE> 21
INDEX TO EXHIBITS FILED HEREWITH
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.7 -- BISYS 401(k) Savings Plan
10.17 -- Credit Agreement by and among The BISYS Group, Inc., the
Lenders party thereto, The Chase Manhattan Bank, The First
National Bank of Chicago, First Union National Bank and
Fleet Bank, National Association, as co-Agents, and The Bank
of New York, as Administrative Agent, with BNY Capital
Markets, Inc., as Arranger, dated as of June 30, 1999,
without exhibits
13 -- Pages 18-36 of the Registrant's 1999 Annual Report to
Shareholders.
21 -- List of significant subsidiaries of The BISYS Group, Inc.
23 -- Consent of PricewaterhouseCoopers LLP
27 -- Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 10.7
THE BISYS GROUP, INC.
401(k) SAVINGS PLAN
Amended and Restated Effective As of January 1, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
----
BACKGROUND INFORMATION.........................................................1
ARTICLE I- DEFINITIONS......................................................2
1.01 Account............................................................2
1.02 Accounting Date....................................................2
1.03 Authorized Leave of Absence........................................2
1.04 Beneficiary........................................................2
1.05 Board..............................................................2
1.06 Code...............................................................2
1.07 Committee..........................................................2
1.08 Compensation.......................................................2
1.09 Disability.........................................................4
1.10 Discretionary Employer Contributions...............................4
1.11 Discretionary Employer Contributions Account.......................5
1.12 Effective Date.....................................................5
1.13 Eligible Employee..................................................5
1.14 Employee...........................................................5
1.15 Employer...........................................................5
1.16 Employer Matching Contributions....................................5
1.17 Employer Matching Contributions Account............................5
1.18 Employment Commencement Date.......................................5
1.19 Entry Date.........................................................5
1.20 ERISA..............................................................6
1.21 Highly Compensated Employee........................................6
1.22 Hour of Service....................................................6
1.23 Income.............................................................7
1.24 Investment Manager.................................................8
1.25 Leased Employee....................................................8
1.26 Nonforfeitable.....................................................8
1.27 Nonhighly Compensated Employee.....................................8
1.28 Normal Retirement Age..............................................8
1.29 Participant........................................................8
1.30 Plan...............................................................8
1.31 Plan Administrator.................................................9
1.32 Plan Year..........................................................9
1.33 Qualified Matching Contributions...................................9
1.34 Qualified Matching Contributions Account...........................9
1.35 Qualified Non-Elective Contributions...............................9
1.36 Qualified Non-Elective Contributions Account.......................9
1.37 Reemployment Commencement Date.....................................9
1.38 Related Employers..................................................9
1.39 Salary Deferral Contributions......................................9
1.40 Salary Deferral Contributions Account..............................9
1.41 Separation from Service...........................................10
1.42 Service...........................................................10
1.43 Trust.............................................................10
1.44 Trust Fund........................................................10
1.45 Trustee...........................................................10
1.46 Valuation Date....................................................10
1.47 Year of Service...................................................10
1.48 Terms Defined Elsewhere...........................................10
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ARTICLE II - PARTICIPATION.................................................12
2.01 Participation Requirements........................................12
2.02 Participation Upon Reemployment...................................12
ARTICLE III - CONTRIBUTIONS................................................13
3.01 Individual Accounts...............................................13
3.02 Salary Deferral Contributions.....................................13
3.03 Dollar Limitation on Salary Deferral Contributions................14
3.04 Limitation Applicable to Salary Deferral Contributions............15
3.05 Distribution of Excess Salary Deferral Contributions..............17
3.06 Qualified Non-Elective Contributions..............................18
3.07 Employer Matching Contributions...................................19
3.08 Limitation Applicable to Employer Matching Contributions..........19
3.09 Distribution of Excess Aggregate Contributions....................22
3.10 Qualified Matching Contributions..................................23
3.11 Discretionary Employer Contributions..............................23
3.12 Forfeitures.......................................................23
3.13 Voluntary Contributions and Qualified Voluntary Contributions.....23
3.14 Rollover and Transfer Contributions...............................24
3.15 Return of Contributions...........................................24
ARTICLE IV - LIMITATIONS ON ALLOCATIONS TO PARTICIPANTS' ACCOUNTS..........26
4.01 Definitions.......................................................26
4.02 Annual Addition Limitations.......................................29
4.03 Overall Limitations...............................................30
4.04 Further Reductions of Contributions...............................31
ARTICLE V - TERMINATION OF SERVICE; PARTICIPANT VESTING....................32
5.01 Vesting...........................................................32
5.02 Year of Service -- Vesting........................................32
5.03 Break in Service -- Vesting.......................................33
5.04 Vesting Computation Period........................................33
5.05 Included Years of Service -- Vesting..............................33
5.06 Forfeiture Occurs.................................................33
5.07 Cash-Out Distributions to Partially-Vested Participants...........34
5.08 Restoration of Forfeited Portion of Account.......................34
ARTICLE VI - TIME AND METHOD OF PAYMENT OF BENEFITS........................36
6.01 Benefits Upon Retirement, Disability or Separation from Service...36
6.02 Notice Regarding Payment Options and Failure of Participant to
Make an Election..................................................36
6.03 Method of Payment of Benefits at Retirement, Disability or
Separation from Service...........................................37
6.04 Waiver Election -- Qualified Joint and Survivor Annuity...........37
6.05 Optional Forms of Payment.........................................38
6.06 Cash-Out of Small Amounts.........................................38
6.07 Required Beginning Date...........................................39
6.08 Minimum Distribution Requirements.................................39
6.09 Participant Benefit Payment Election..............................41
6.10 Reemployment of Participants Receiving Payments...................41
6.11 Lost Participant or Beneficiary...................................42
6.12 Facility of Payment...............................................42
6.13 Distributions Under Domestic Relations Orders.....................42
6.14 Withholding on Distributions......................................44
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6.15 No Distribution Prior to Separation from Service, Death or
Disability........................................................44
6.16 Eligible Rollover Distributions...................................44
ARTICLE VII - PRE-RETIREMENT DEATH BENEFITS................................46
7.01 Benefit Payable in the Event of Death Before Benefit
Commencement Date.................................................46
7.02 Waiver Election for Married Participants..........................46
7.03 Timing and Form of Distributions..................................47
7.04 Cash-Out of Small Death Benefit Amounts...........................47
7.05 Designation of Beneficiary........................................48
7.06 Failure of Beneficiary Designation................................48
ARTICLE VIII - LOANS; IN-SERVICE WITHDRAWALS...............................49
8.01 Loans.............................................................49
8.02 Loan Terms and Conditions.........................................50
8.03 Withdrawals from Rollover Contributions Account, Transfer
Contributions Account, Voluntary Contributions Account and
Qualified Voluntary Contributions Account.........................51
8.04 In-Service Withdrawal On or After Age 59 1/2......................52
8.05 Hardship Withdrawals..............................................52
ARTICLE IX - EMPLOYER ADMINISTRATIVE PROVISIONS............................54
9.01 Information to Plan Administrator.................................54
9.02 No Liability......................................................54
9.03 Indemnity of Committee............................................54
9.04 Indemnity of Trustee..............................................54
9.05 Employer Direction of Investment..................................55
ARTICLE X - PARTICIPANT ADMINISTRATIVE PROVISIONS..........................56
10.01 Personal Data to Plan Administrator............................56
10.02 Address for Notification.......................................56
10.03 Assignment or Alienation.......................................56
10.04 Participant Direction of Investment............................56
10.05 Litigation Against the Trust...................................57
10.06 Information Available..........................................57
10.07 Claims Procedure...............................................57
ARTICLE XI - ADMINISTRATION OF THE PLAN....................................59
11.01 Allocation of Responsibility Among Fiduciaries for Plan and
Trust Administration...........................................59
11.02 Appointment of Committee.......................................59
11.03 Committee Procedures...........................................59
11.04 Records and Reports............................................60
11.05 Other Committee Powers and Duties..............................60
11.06 Rules and Decisions............................................61
11.07 Application and Forms for Benefits.............................61
11.08 Authorization of Benefit Payments..............................61
11.09 Funding Policy.................................................61
11.10 Fiduciary Duties...............................................61
11.11 Allocation or Delegation of Duties and Responsibilities........62
11.12 Separate Accounting............................................62
11.13 Value of Participant's Account.................................63
11.14 Account Adjustments............................................63
11.15 Valuation of Trust Fund........................................63
11.16 Individual Statement...........................................64
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ARTICLE XII - TOP-HEAVY RULES..............................................65
12.01 Minimum Employer Contribution..................................65
12.02 Top-Heavy Vesting..............................................65
12.03 Additional Contribution........................................66
12.04 Determination of Top-Heavy Status..............................66
12.05 Limitation of Allocations......................................67
12.06 Definitions....................................................67
ARTICLE XIII - MISCELLANEOUS...............................................69
13.01 Evidence.......................................................69
13.02 No Responsibility for Employer Action..........................69
13.03 Fiduciaries Not Insurers.......................................69
13.04 Waiver of Notice...............................................69
13.05 Successors.....................................................69
13.06 Word Usage.....................................................70
13.07 Headings.......................................................70
13.08 State Law......................................................70
13.09 Employment Not Guaranteed......................................70
13.10 Payment of Plan Expenses.......................................70
ARTICLE XIV - EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION....................71
14.01 Exclusive Benefit..............................................71
14.02 Amendment by Employer..........................................71
14.03 Amendment to Vesting Provisions................................71
14.04 Discontinuance.................................................72
14.05 Full Vesting on Plan Termination...............................72
14.06 Merger, Direct Transfer and Elective Transfer..................72
14.07 Termination of the Plan........................................73
Schedule I - Recognition of Prior Service with Certain Acquired Entities......74
Schedule II - Alternative Vesting Schedules for Certain Participants..........75
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THE BISYS GROUP, INC.
401(k) SAVINGS PLAN
BACKGROUND INFORMATION
The BISYS Group, Inc. (formerly BISYS, Inc.) (the "Employer") hereby
amends and restates the BISYS 401(k) Savings Plan as The BISYS Group, Inc.
401(k) Savings Plan (the "Plan") to provide retirement benefits to eligible
employees of the Employer and Related Employers which have adopted the Plan. The
original plan, known as the BISYS 401(k) Savings Plan, was established effective
November 1, 1989, as a profit sharing plan with a cash or deferred feature, and
has been amended from time to time thereafter.
The Plan is amended and restated effective as of January 1, 1997, and
such other dates as are set forth herein, to change the form of the Plan from a
prototype plan to an individually designed plan, to update the Plan for changes
in applicable law (including the General Agreement on Tariffs and Trade, the
Uniformed Services Employment and Reemployment Rights Act, the Small Business
Job Protection Act of 1996 and the Taxpayer Relief Act of 1997) and in other
respects. Effective January 1, 1999, the name of the Plan shall be The BISYS
Group, Inc. 401(k) Savings Plan. The provisions of this amended and restated
Plan shall apply solely to an Employee whose employment with the Employer and
Related Employers participating in the Plan terminates on or after the Effective
Date of this restated Plan. An Employee whose employment with the Employer and
Related Employers participating in the Plan terminates prior to the Effective
Date of this restated Plan shall be entitled to a benefit, if any, as determined
under the provisions of the Plan in effect on the date his employment
terminated.
<PAGE> 7
ARTICLE I
DEFINITIONS
Each word and phrase defined in this Article I shall have the following
meaning whenever such word or phrase is capitalized and used herein unless a
different meaning is clearly required by the context of this agreement.
1.01 Account means the separate bookkeeping account that the Plan
Administrator or the Trustee shall maintain for a Participant pursuant to this
Plan.
1.02 Accounting Date means the last day of the Plan Year. Except as
otherwise provided herein, the Plan Administrator shall make Plan allocations
for a particular Plan Year as of the Accounting Date of that Plan Year.
1.03 Authorized Leave of Absence means a leave of absence granted in
accordance with the nondiscriminatory and uniform policies and procedures of the
Employer or Related Employer.
1.04 Beneficiary means a person, whether an individual, legal
representative, estate or other entity, designated by a Participant pursuant to
Section 7.05, who is or may become entitled to a benefit under the Plan. A
Beneficiary who becomes entitled to a benefit under the Plan shall remain a
Beneficiary under the Plan until the Trustee has fully distributed his benefit
to him. A Beneficiary's right to (and the Plan Administrator's or Trustee's duty
to provide to the Beneficiary) information or data concerning the Plan shall not
arise until he first becomes entitled to receive a benefit under the Plan.
1.05 Board means the board of directors of The BISYS Group, Inc.
1.06 Code means the Internal Revenue Code of 1986, as amended from time
to time.
1.07 Committee means the person or persons appointed pursuant to
Section 11.02 as the Committee, as from time to time constituted, to assist the
Employer in the administration of the Plan in accordance with Article XI.
1.08 Compensation means, effective January 1, 1999, the Participant's
wages, salaries, fees for professional services and other amounts received for a
Plan Year (without regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of employment with the
Employer maintaining the Plan to the extent such amounts are includible in gross
income (including, but not limited to, commissions paid salesmen, compensation
for services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses). Compensation also includes Elective Contributions
made by the Employer on the Employee's behalf. "Elective Contributions" are
amounts excludible from the Employee's gross income under Code Sections
402(e)(3), 402(h), 125 or 403(b). A Compensation payment includes
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Compensation paid by the Employer to an Employee through another person under
the common paymaster provisions of Sections 3121(s) and 3306(p) of the Code.
Compensation does not include:
(a) Employer contributions (other than Elective Contributions)
to a plan of deferred compensation to the extent the contributions are
not included in the gross income of the Employee for the taxable year
in which contributed, Employer contributions made on behalf of an
Employee to a simplified employee pension plan under Code Section 408
to the extent such contributions are excludible from the Employee's
gross income, and any distributions from a plan of deferred
compensation, regardless of whether such amounts are includible in the
gross income of the Employee when distributed.
(b) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by an Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture.
(c) Amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock option.
(d) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that the
premiums are not includible in the gross income of the Employee), or
contributions made by an Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code Section 403(b) (whether or not the contributions are
excludible from the gross income of the Employee), other than Elective
Contributions.
(e) Reimbursements and other expense allowances, fringe
benefits (cash and non-cash), moving expenses, deferred compensation
(other than Elective Contributions), and welfare benefits (including
payments by the Employer on account of an Employee's short-term
disability).
(f) With respect to Highly Compensated Employees only,
premiums for executive split dollar life insurance which are includible
in the gross income of such Employee, and taxable income to such an
Employee which is attributable to the forgiveness of a loan by the
Employer.
Effective June 1, 1999, only Compensation earned while a
Participant in the Plan shall be considered for purposes of determining
contributions under the Plan with respect to such Participant.
Any reference in this Plan to Compensation is a reference to
the definition in this Section 1.08, unless the Plan reference specifies a
modification to this definition. The Plan Administrator will take into account
only Compensation actually paid for the relevant period.
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<PAGE> 9
For Plan Years beginning on or after January 1, 1994, in
addition to other applicable limitations set forth in the Plan and
notwithstanding any other provision of the Plan to the contrary, the annual
Compensation of each Employee taken into account under the Plan shall not exceed
$150,000 (as adjusted by the Commissioner of Internal Revenue for increases in
the cost of living in accordance with Code Section 401(a)(17)(B)). For any Plan
Year beginning after December 31, 1988, but prior to January 1, 1994, the Plan
Administrator shall take into account only the first $200,000 (or beginning
January 1, 1990, such larger amount as the Secretary of the Treasury prescribed)
of any Participant's Compensation.
The cost-of-living adjustment in effect for a calendar year
applies to any period, not exceeding twelve (12) months, over which Compensation
is determined (the "Determination Period") beginning in such calendar year. If a
Determination Period consists of fewer than twelve months, the compensation
limit described in this Section will be multiplied by a fraction, the numerator
of which is the number of months in the Determination Period, and the
denominator of which is twelve. If Compensation for any prior year is taken into
account in determining a Participant's allocations under the Plan for a Plan
Year, then Compensation for such prior year shall be subject to the annual
compensation limitation in effect for that prior year.
For any Plan Year beginning after December 31, 1988 and prior
to January 1, 1997, the compensation limitation applies to the combined
Compensation of the Employee and of any family member aggregated with the
Employee under the rules of Code Section 414(q)(6), who is either the Employee's
spouse or the Employee's lineal descendant under the age of 19 at the close of
the Plan Year. If, for a Plan Year, the combined Compensation of the Employee
and such family members who are Participants entitled to an accrual for that
Plan Year exceeds the applicable compensation limitation, Compensation for each
such Participant means his Adjusted Compensation. "Adjusted Compensation" is the
amount which bears the same ratio to the compensation limitation as the affected
Participant's Compensation (without regard to the compensation limitation) bears
to the combined Compensation of all the affected Participants in the family
unit.
Prior to January 1, 1999, Compensation shall be determined in
accordance with Code Section 3401(a), but including pre-tax elective
contributions. Prior to June 1, 1999, Compensation shall not be limited to
compensation earned while a Participant participating in the Plan.
1.09 Disability means an illness or injury of a potentially permanent
nature, expected to last for a continuous period of not less than twelve months,
certified by a physician selected by or satisfactory to the Employer, which
prevents the Employee from engaging in any occupation for wage or profit for
which the Employee is reasonably fitted by training, education or experience.
1.10 Discretionary Employer Contributions means contributions to a
Participant's Discretionary Employer Contributions Account pursuant to Section
3.11.
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1.11 Discretionary Employer Contributions Account means that portion of
a Participant's Account credited with Discretionary Employer Contributions
pursuant to Section 3.11, and adjustments thereto.
1.12 Effective Date means January 1, 1997, the date on which the
provisions of this amended and restated Plan become effective, except as
otherwise provided herein. The Effective Date of the original plan was November
1, 1989.
1.13 Eligible Employee means an Employee of the Employer other than (i)
an Employee covered by a collective bargaining agreement under which retirement
benefits were the subject of good faith bargaining (unless such agreement
provides for participation in this Plan), (ii) an Employee who is a nonresident
alien and who receives no earned income within the meaning of Code
Section 911(a)(2) from the Employer which constitutes income from sources within
the United States, (iii) effective as of June 1, 1999, a Leased Employee or (iv)
temporary employees.
Notwithstanding the foregoing, an individual who becomes an
Employee of the Employer due to the merger or acquisition of his previous
employer into or by the Employer, shall become an Eligible Employee as soon as
administratively practicable after the merger or acquisition (but not later than
the last day of the Plan Year next following such merger or acquisition), except
as may be provided otherwise in Schedule I to the Plan.
1.14 Employee means any person who receives remuneration for personal
services rendered to the Employer or any Related Employer as a common law
employee. A person who would be receiving such remuneration except for an
Authorized Leave of Absence shall also be considered an Employee. If the
Employer or a Related Employer does not characterize a person as an Employee and
is later required to recharacterize a person's status with the Employer as an
Employee, the person will be treated as an Employee for Plan eligibility
prospectively from the date of recharacterization.
1.15 Employer means The BISYS Group, Inc., a Delaware corporation, and
any Related Employer which shall ratify and adopt the Plan in a manner
satisfactory to the Board.
1.16 Employer Matching Contributions means contributions to a
Participant's Employer Matching Contributions Account pursuant to Section 3.07.
1.17 Employer Matching Contributions Account means that portion of a
Participant's Account credited with Employer Matching Contributions pursuant to
Section 3.07, and adjustments thereto.
1.18 Employment Commencement Date means the date on which an Employee
first performs an Hour of Service for the Employer or a Related Employer.
1.19 Entry Date means the first day of each calendar month.
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1.20 ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
1.21 Highly Compensated Employee means, effective January 1, 1997, any
Employee who:
(a) was a more than five percent (5%) owner (as defined in
Code Section 416(i)) of the Employer at any time during the current or
preceding Plan Year, or
(b) for the preceding Plan Year:
(1) received more than $80,000 in annual Compensation
from the Employer (or such other amount, as adjusted pursuant
to Code Section 415(d) except that the base period shall be
the calendar quarter ending September 30, 1996), and
(2) was in the top twenty percent (20%) of Employees
when ranked on the basis of Compensation paid during such Plan
Year.
For purposes of this Section 1.21, "Compensation" means
Compensation as defined in Section 1.08 of the Plan for the entire Plan Year
regardless of whether such Employee was a Participant in the Plan for the entire
Plan Year, but not taking into account Section 1.08(f). Related Employers to the
Employer shall be treated as a single employer with the Employer, for purposes
of this Section.
A former Employee shall be treated as a Highly Compensated
Employee if such Employee was a Highly Compensated Employee when such Employee
separated from Service, or such Employee was a Highly Compensated Employee at
any time after attaining age 55. The determination of who is a Highly
Compensated Employee shall be made in accordance with Section 414(q) of the Code
and applicable regulations thereunder.
1.22 Hour of Service means:
(a) Each Hour of Service for which the Employer, either
directly or indirectly, pays an Employee, or for which the Employee is
entitled to payment, for the performance of duties during the Plan
Year. Hours of Service shall be credited under this Subsection (a) to
an Employee for the Plan Year in which the Employee performs the
duties, irrespective of when paid.
(b) Each Hour of Service for back pay, irrespective of
mitigation of damages, to which the Employer has agreed or for which
the Employee has received an award. Hours of Service shall be credited
under this Subsection (b) to an Employee for the Plan Year(s) to which
the award or the agreement pertains rather than for the Plan Year in
which the award, agreement or payment is made.
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<PAGE> 12
(c) Each Hour of Service for which the Employer, either
directly or indirectly, pays an Employee, or for which the Employee is
entitled to payment (irrespective of whether the employment
relationship is terminated), for reasons other than for the performance
of duties during a Plan Year, such as leave of absence, vacation,
holiday, sick leave, illness, incapacity (including disability),
layoff, jury duty or military duty. No more than 501 Hours of Service
shall be credited under this Subsection (c) to an Employee on account
of any single continuous period during which the Employee does not
perform any duties (whether or not such period occurs during a single
Plan Year). The Plan Administrator shall credit Hours of Service under
this paragraph (c) in accordance with the rules of Subsections (b) and
(c) of Department of Labor Reg.Section 2530.200b-2, which are
incorporated herein by reference.
An Hour of Service shall not be credited to an Employee under
more than one of the above paragraphs. A computation period for purposes of this
Section 1.22, is the Plan Year or Service period, Break in Service period or
other period, as determined under the Plan provision for which an Employee's
Hours of Service are measured.
An Employee shall be credited with Hours of Service on the
basis of months worked. For purposes of the Plan, an Employee shall be credited
with one hundred-ninety (190) Hours of Service during each calendar month if the
Employee would be credited with at least one (1) Hour of Service during such
month.
Hours of Service will be credited for employment with other
members of a group of Related Employers of which the Employer is a member. Hours
of Service will also be credited for any individual considered an Employee for
purposes of this Plan under Section 414(n) or Section 414(o) of the Code and the
regulations thereunder.
Solely for purposes of determining whether the Employee incurs
a Break in Service under any provision of this Plan, an Employee shall be
credited with Hours of Service during the Employee's unpaid absence period due
to maternity or paternity leave. An Employee shall be considered to be on
maternity or paternity leave for Plan purposes if the Employee's absence is due
to the Employee's pregnancy, the birth of the Employee's child, the placement
with the Employee of an adopted child, or the care of the Employee's child
immediately following the child's birth or placement. An Employee shall be
credited with the Hours of Service the Employee would have received if he were
paid during the absence period or, if the number of Hours of Service the
Employee would have received cannot be determined, on the basis of eight (8)
hours per day during the absence period. Only the number of Hours of Service (up
to 501) necessary to prevent an Employee's Break in Service shall be credited to
such an Employee.
1.23 Income means the net gain or loss of the Trust Fund from
investments, as reflected by interest payments, dividends, realized and
unrealized gains and losses on securities, other investment transactions and
expenses paid from the Trust Fund. In determining the Income of the Trust Fund
as of any date, assets shall be valued on the basis of their then fair market
value.
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<PAGE> 13
1.24 Investment Manager means a person or organization who is appointed
to direct the investment of all or part of the Trust Fund, and who is either (a)
registered in good standing as an Investment Adviser under the Investment
Advisers Act of 1940, (b) a bank, as defined in such Act, or (c) an insurance
company qualified to perform investment management services under the laws of
more than one state of the United States, and that has acknowledged in writing
that it is a fiduciary with respect to the Plan.
1.25 Leased Employee means, effective January 1, 1997, any person
(other than an Employee of the Employer) who, pursuant to an agreement between
the Employer and any other person ("Leasing Organization"), has performed
services for the Employer (or for the Employer and related persons determined in
accordance with Section 414(n)(6) of the Code) on a substantially full time
basis for a period of at least one year, which services are performed under the
primary direction or control of the Employer. Contributions or benefits provided
a Leased Employee by the Leasing Organization that are attributable to services
performed for the Employer shall be treated as provided by the Employer.
A Leased Employee shall not be considered an Employee of the
Employer if such employee is covered by a money purchase pension plan that
provides (i) a nonintegrated employer contribution rate for each Participant of
at least ten percent (10%) of compensation, (ii) immediate participation for
each employee of the Leasing Organization (other than employees who perform
substantially all of their services for the Leasing Organization), and (iii)
full and immediate vesting; and leased employees do not constitute more than
twenty percent (20%) of the Employer's nonhighly compensated workforce.
1.26 Nonforfeitable means a Participant's or Beneficiary's
unconditional claim, legally enforceable against the Plan, to all or a portion
of the Participant's Account.
1.27 Nonhighly Compensated Employee means any Employee who is not a
Highly Compensated Employee.
1.28 Normal Retirement Age means the date the Participant attains age
65.
1.29 Participant means an Employee who is eligible to be and becomes a
Participant in the Plan in accordance with the provisions of Section 2.01. An
Employee who becomes a Participant shall remain a Participant under the Plan
until the Trustee has fully distributed the Nonforfeitable portion of such
Participant's Account to him.
1.30 Plan means the plan set forth herein or as amended from time to
time, designated as The BISYS Group, Inc. 401(k) Savings Plan effective January
1, 1999. Prior to January 1, 1999, the Plan was a national prototype plan known
as the BISYS 401(k) Savings Plan.
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1.31 Plan Administrator means the Employer, the Committee, or such
other person or persons designated by the Employer to administer the Plan on
behalf of the Employer.
1.32 Plan Year means the fiscal year of the Plan, which is the twelve
(12) consecutive month period commencing on January 1 and ending on December 31.
1.33 Qualified Matching Contributions means Employer Matching
Contributions that are at all times Nonforfeitable and subject to the
distribution requirements of Section 401(k) of the Code when made to the Plan.
1.34 Qualified Matching Contributions Account means that portion of a
Participant's Account credited with Qualified Matching Contributions pursuant to
Section 3.10, and adjustments relating thereto.
1.35 Qualified Non-Elective Contributions means contributions (other
than Employer Matching Contributions or Qualified Matching Contributions) made
by the Employer and allocated to Participants' Accounts that the Participants
may not elect to receive in cash until distributed from the Plan; that are
Nonforfeitable when made; and that are distributable only in accordance with the
distribution provisions that are applicable to Salary Deferral Contributions and
Qualified Matching Contributions, except that Qualified Non-Elective
Contributions may not be withdrawn on account of the financial hardship of a
Participant.
1.36 Qualified Non-Elective Contributions Account means that portion of
a Participant's account credited with Qualified Non-Elective Contributions
pursuant to Section 3.10, and adjustments relating thereto.
1.37 Reemployment Commencement Date means the date upon which an
Employee first performs an Hour of Service following a Break in Service.
1.38 Related Employers means a controlled group of corporations (as
defined in Section 414(b) of the Code), trades or businesses (whether or not
incorporated) which are under common control (as defined in Section 414(c) of
the Code), or an affiliated service group (as defined in Sections 414(m) and (o)
of the Code). If the Employer is a member of a group of Related Employers, the
term "Employer" includes the Related Employers for any purpose required by the
Code or the Plan. However, only an Employer described in Section 1.15 may
contribute to the Plan and only an Employee employed by an Employer described in
Section 1.15 is eligible to participate in this Plan, unless otherwise
specifically permitted by the Board.
1.39 Salary Deferral Contributions means contributions to a
Participant's Salary Deferral Contributions Account pursuant to Section 3.02.
1.40 Salary Deferral Contributions Account means that portion of a
Participant's Account credited with Salary Deferral Contributions pursuant to
Section 3.02, and adjustments relating thereto.
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<PAGE> 15
1.41 Separation from Service means the termination of the Employee's
employment relationship with the Employer or any Related Employer.
1.42 Service means any period of time the Employee is in the employ of
the Employer, including any period the Employee is on unpaid Authorized Leave of
Absence by the Employer and any leave of absence authorized under the Family and
Medical Leave Act of 1993 to the extent that Service is required to be credited.
For purposes of counting an Employee's Service, the Plan shall treat Service
with any Related Employer as Service with the Employer. The Plan shall also
recognize certain prior periods of employment with acquired entities as Service
but only as specifically set forth in Schedule I to the Plan. An Authorized
Leave of Absence due to service in the Armed Forces of the United States shall
not constitute a Break in Service and shall be considered as Service for all
purposes under the Plan, provided that the Employee complies with all of the
requirements of Federal law in order to be entitled to reemployment with the
Employer within the period provided by law. Notwithstanding any provision of
this Plan to the contrary, effective on and after December 12, 1994,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.
1.43 Trust means the Trust known as The BISYS Group, Inc. 401(k)
Savings Plan Trust, created and maintained in accordance with the terms of the
trust agreement between the Trustee and the Plan, as amended from time to time.
1.44 Trust Fund means all property of every kind held or acquired by
the Trustee under the Plan.
1.45 Trustee means such person or entity that is or may be appointed by
the Employer in accordance with the Trust agreement between such Trustee and the
Plan, as amended from time to time.
1.46 Valuation Date means the last day of each Plan Year and such other
dates during the Plan Year designated by the Employer.
1.47 Year of Service means any Plan Year during which the Employee
completes at least 1,000 Hours of Service.
1.48 Terms Defined Elsewhere
Actual Deferral Percentage................................3.04
Adjusted Compensation.....................................1.07
Aggregate Limit...........................................3.08
Annual Additions.......................................4.01(a)
Annuity Starting Date.....................................6.02
Break in Service..........................................5.03
Claimant..................................................9.08
Company................................................4.01(b)
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<PAGE> 16
Compensation..............................4.01(c) and 12.05(c)
Contribution Percentage...................................3.08
Contribution Percentage Amounts...........................3.08
Defined Benefit Plan...................................4.01(d)
Defined Benefit Plan Fraction..........................4.03(a)
Defined Contribution Plan..............................4.01(e)
Defined Contribution Plan Fraction.....................4.03(b)
Determination Date....................................12.05(g)
Determination Period......................................1.07
Eligible Participant......................................3.08
Employer..............................................12.05(f)
Excess Aggregate Contributions............................3.08
Excess Compensation.......................................1.07
Excess Salary Deferral Contributions......................3.04
Five-percent Owner.................................6.04(b)(ii)
Forfeiture Break in Service...............................5.05
Key Employee..........................................12.05(a)
Limitation Year........................................4.01(f)
Maximum Permissible Amount.............................4.10(g)
Non-Key Employee......................................12.05(b)
Nonshareholder............................................3.05
Permissive Aggregation Group..........................12.05(e)
Projected Annual Benefit...............................4.01(h)
Qualified Voluntary Contributions.........................3.13
Qualified Voluntary Contributions Account.................3.13
Required Aggregation Group............................12.05(d)
Required Beginning Date.............................6.04(b)(1)
Rollover Contributions....................................3.07
Rollover Contributions Account............................3.07
Salary Deferral Contributions.............................3.02
Shareholder...............................................3.05
Special Valuation Dates.........................1.41 and 10.14
Top-Heavy................................................12.03
Transfer Contributions....................................3.07
Transfer Contributions Account............................3.07
Vesting Computation Period................................5.04
Voluntary Contributions...................................3.13
Voluntary Contributions Account...........................3.13
Year of Service - Vesting.................................5.02
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<PAGE> 17
ARTICLE II
PARTICIPATION
2.01 Participation Requirements
Each Eligible Employee who was a Participant in the Plan on the day
before the Effective Date of this restated Plan shall continue as a Participant
in this Plan, as restated. Any other Eligible Employee who is employed by the
Employer shall become a Participant on the Entry Date (if employed by the
Employer on that date) coincident with or next following the date as of which he
has completed one month of Service with the Employer.
An Eligible Employee may enroll as a Participant in the Salary Deferral
Contributions feature under the Plan as of the first or any succeeding Entry
Date after he becomes eligible to participate in the Plan (but not
retroactively), by making a Salary Deferral Contribution election and providing
a Beneficiary designation and such other information as the Plan Administrator
shall require in the manner required by the Plan Administrator prior to the
applicable Entry Date. The Plan Administrator may establish rules and procedures
consistent with Section 3.02 of the Plan governing the time and manner in which
enrollments shall be processed.
2.02 Participation Upon Reemployment
A Participant whose employment with the Employer terminates shall
re-enter the Plan as a Participant upon his Reemployment Commencement Date and
may recommence Salary Deferral Contributions as of the first payroll period
following his Reemployment Commencement Date. An Eligible Employee who has met
the participation requirements of Section 2.01 but who terminates employment
with the Employer prior to becoming a Participant will become a Participant on
the later of (i) the Entry Date on which he would have become a Participant had
he not terminated employment, or (ii) his Reemployment Commencement Date. Any
other Eligible Employee whose employment terminates and who is subsequently
re-employed shall become a Participant in accordance with the provisions of
Section 2.01.
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<PAGE> 18
ARTICLE III
CONTRIBUTIONS
3.01 Individual Accounts
The Plan Administrator, or, if the Plan Administrator so determines,
the Trustee, shall maintain an Account for each Participant having an amount to
his credit in the Trust Fund. Each Account may be divided into separate
subaccounts for Salary Deferral Contributions, Employer Matching Contributions,
Discretionary Employer Contributions, Qualified Matching Contributions,
Qualified Non-Elective Contributions, Rollover Contributions, Transfer
Contributions, Voluntary Contributions and/or Qualified Voluntary Contributions.
Furthermore, if a Participant re-enters the Plan subsequent to having a
Forfeiture Break in Service, the Plan Administrator or the Trustee shall
maintain a separate Account for the Participant's pre-Forfeiture Break in
Service Account and a separate Account for his post-Forfeiture Break in Service
Account, unless the Participant's entire Account under the Plan is one hundred
percent (100%) Nonforfeitable. The Plan Administrator will make allocations, or
request the Trustee to make allocations, to the Accounts of the Participants in
accordance with the provisions of Section 11.14. The Plan Administrator may
direct the Trustee to maintain a temporary segregated investment Account in the
name of a Participant to prevent a distortion of income, gain, or loss
allocations under Section 11.14. The Plan Administrator shall maintain records
of its activities.
3.02 Salary Deferral Contributions
(a) Election. A Participant may elect to have the Employer
contribute a portion of such Participant's Compensation to his Account
each payroll period. The amount contributed on behalf of the
Participant shall be a whole percentage of his Compensation from 1% to
15%, commencing as of the first payroll date administratively
practicable after the Entry Date as of which the Participant's
elections are effective. A Participant may elect to make Salary
Deferral Contributions effective as of the first payroll date
administratively practicable after the Entry Date he is first eligible
to participate in the Plan, or after the first day of any subsequent
month. Each election to make Salary Deferral Contributions shall
continue in effect until the Participant notifies the Plan
Administrator, in the manner prescribed by the Plan Administrator, of
his election to change or discontinue Salary Deferral Contributions.
Notwithstanding the foregoing, a Participant may
elect to have up to 100% of his Compensation withheld for one or more
pay periods to reach the maximum amount of annual Salary Deferral
Contributions permitted under the Plan, taking into account the
limitations of Section 3.03, 3.04 and Article IV of the Plan.
(b) Change in Election. A Participant may change the
percentage of his Compensation elected as a Salary Deferral
Contribution as of any payroll period with
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<PAGE> 19
reasonable notice to the Plan Administrator, but not retroactively. A
Participant may elect to cease making Salary Deferral Contributions at
any time by giving reasonable notice to the Plan Administrator, but may
not recommence contributions until the next payroll period following
the election to cease. Any such elections to stop or to make changes in
the amount of Salary Deferral Contributions shall be made in the manner
prescribed by the Plan Administrator and shall become effective within
a reasonable period.
3.03 Dollar Limitation on Salary Deferral Contributions
(a) Definitions
For purposes of this Section 3.03, the following definitions
and rules of interpretation shall apply:
(1) "Elective Deferrals" shall mean any Employer
contributions made to the Plan at the election of the
Participant, in lieu of cash compensation, and shall include
contributions made pursuant to a compensation reduction
agreement or other deferral mechanism. With respect to any
taxable year, a Participant's Elective Deferrals are the sum
of all employer contributions made on behalf of such
Participant pursuant to an election to defer under any
qualified cash or deferred arrangement as described in
Section 401(k) of the Code, any simplified employee pension
cash or deferred arrangement as described in Code
Section 402(h)(1)(B), any eligible deferred compensation plan
under Code Section 457, any plan as described under Code
Section 501(c)(18), and any Employer contributions made on
behalf of a Participant for the purchase of an annuity
contract under Code Section 403(b) pursuant to a compensation
reduction agreement.
(2) "Excess Elective Deferrals" shall mean those
Elective Deferrals that are includible in a Participant's
gross income under Section 402(g) of the Code to the extent
such Participant's Elective Deferrals for a taxable year
exceed the dollar limitation under such Code Section. Excess
Elective Deferrals shall be treated as Annual Additions under
the Plan, except to the extent they are distributed pursuant
to Subsection (c) below.
(b) Prohibition of Deferrals in Excess of Code
Section 402(g) Dollar Limitations
No Participant shall be permitted to have Elective
Deferrals made under this Plan, or any other qualified plan, during any
taxable year, in excess of the dollar limitation contained in Section
402(g) of the Code ($10,000 for 1999 or such other dollar amount as the
Commissioner of Internal Revenue may prescribe in accordance with Code
Section 402(g)(15) for the Plan Year), as in effect at the beginning of
such taxable year.
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<PAGE> 20
(c) Distribution of Excess Elective Deferrals
A Participant may assign to this Plan any Excess
Elective Deferrals made during a taxable year of the Participant by
notifying the Plan Administrator on or before March 15 of the following
taxable year of the amount of the Excess Elective Deferrals to be
assigned to the Plan. Notwithstanding any other provision of the Plan,
Excess Elective Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 to any Participant
to whose Account Excess Elective Deferrals were assigned for the
preceding year and who claims Excess Elective Deferrals for such
taxable year. Participants who claim Excess Elective Deferrals for the
preceding taxable year must submit their claims in writing to the Plan
Administrator by March 15 of the calendar year following the Plan Year
in which such Excess Elective Deferrals are claimed to have been made.
(d) Determination of Income or Loss
Excess Elective Deferrals shall be adjusted for any
income or loss. The Plan Administrator shall determine whether such
adjustments shall include the period from the end of the taxable year
in which the excess arose up to the date of distribution (the "gap
period"). The income or loss allocable to Excess Elective Deferrals is
the sum of (i) income or loss allocable to the Participant's Elective
Deferrals for the taxable year multiplied by a fraction, the numerator
of which is such Participant's Excess Elective Deferrals for the year
and the denominator of which is the Participant's Account attributable
to Elective Deferrals without regard to any income or loss occurring
during such taxable year; and (ii) if the distribution is to be
adjusted for income or loss during the gap period, ten percent of the
amount determined under (i) multiplied by the number of whole calendar
months between the end of the Participant's taxable year and the date
of distribution, counting the month of distribution if distribution
occurs after the 15th of such month. Alternatively, the Plan
Administrator may determine the income or loss allocable to Excess
Elective Deferrals under any reasonable method which does not violate
the general nondiscrimination rules of Code Section 401(a)(4), is used
consistently for all Participants and for all such corrective
distributions under the Plan for the Plan Year, and is used by the Plan
for allocating income to Participants' Accounts.
3.04 Limitation Applicable to Salary Deferral Contributions
(a) Definitions
For purposes of this Section, the following
definitions shall apply:
(1) "Actual Deferral Percentage", for each Plan Year,
means the average of the ratios (calculated separately for
each Eligible Employee) of:
(A) the amount of Salary Deferral
Contributions actually paid over to the Trust Fund on
behalf of each such Eligible Employee,
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<PAGE> 21
including Excess Salary Deferral Contributions, but
excluding Salary Deferral Contributions that are
taken into account in the Actual Contribution
Percentage test (provided the Average Deferral
Percentage test is satisfied both with and without
exclusion of these Salary Deferral Contributions), to
(B) the Eligible Employee's Compensation for
such Plan Year for the period during which he was a
Participant in the Plan.
For purposes of computing Actual Deferral
Percentages, an Eligible Employee who would be a Participant
but for the failure to make Salary Deferral Contributions
shall be treated as a Participant on whose behalf no Salary
Deferral Contributions are made. The Average Deferral
Percentages shall be calculated separately for the group of
Eligible Employees who are Highly Compensated Employees and
the group of Eligible Employees who are Nonhighly Compensated
Employees.
(2) "Excess Salary Deferral Contributions," with
respect to any Plan Year, means the excess of:
(A) the aggregate amount of Employer
contributions actually taken into account in
computing the Actual Deferral Percentage of Highly
Compensated Employees for such Plan Year, over
(B) the maximum amount of such contributions
permitted by the Actual Deferral Percentage test
(determined by reducing contributions made on behalf
of Highly Compensated Employees in the order of their
Actual Deferral Percentages, beginning with the
highest of such percentages).
(b) Actual Deferral Percentage Test. Unless the requirements
of Code Section 401(k)(12) are satisfied for the Plan Year, the Actual
Deferral Percentage for Participants who are Highly Compensated
Employees for such Plan Year and the Actual Deferral Percentage for
Participants who are Nonhighly Compensated Employees for the preceding
Plan Year must satisfy one of the following tests:
(1) the Actual Deferral Percentage for Participants
who are Highly Compensated Employees for the Plan Year shall
not exceed the Actual Deferral Percentage for Participants who
are Nonhighly Compensated Employees for the preceding Plan
Year, multiplied by 1.25, or
(2) the Actual Deferral Percentage for Participants
who are Highly Compensated Employees for the Plan Year shall
not exceed the lesser of: the Actual Deferral Percentage for
Participants who are Nonhighly Compensated Employees for the
preceding Plan Year multiplied by two (2), or the Actual
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<PAGE> 22
Deferral Percentage for Participants who are Nonhighly
Compensated Employees plus two (2) percentage points.
Each Plan Year, a determination shall be made whether the
deferral elections of the Eligible Employees who are Highly Compensated
Employees must be reduced so that the Actual Deferral Percentage for
the group of Eligible Employees who are Highly Compensated Employees is
not more than the greater of subparagraphs (b)(1) or (b)(2). If a
reduction is required, the dollar amount of the Excess Salary Deferral
Contributions is determined as described in (a)(2), above. Next, the
Salary Deferral Contributions of the Highly Compensated Employee with
the highest dollar amount of Salary Deferral Contributions (not
necessarily the Highly Compensated Employee with the highest Actual
Deferral Percentage) is reduced to the extent required to equal the
aggregate maximum deferral dollar amount for Eligible Employees who are
Highly Compensated Employees permitted by subparagraphs (b)(1) or
(b)(2), or to cause such Highly Compensated Employee's Salary Deferral
Contributions to equal the dollar amount of Salary Deferral
Contributions of the Highly Compensated Employee with the next highest
dollar amount of Salary Deferral Contributions, whichever is less. This
process is repeated until the aggregate dollar amount of the Salary
Deferral Contributions of all Eligible Employees who are Highly
Compensated Employees are reduced to an amount that will cause the
dollar amount of the Salary Deferral Contributions for all Highly
Compensated Employees in the aggregate to equal the dollar amount of
Salary Deferral Contributions that will cause the average of the Actual
Deferral Percentages for the group of Eligible Employees who are Highly
Compensated Employees to equal the maximum permitted under this
Section.
Alternatively, (or in addition to the reductions set forth
above), if the Employer has made any Qualified Matching Contributions
or Qualified Non-Elective Contributions for the Plan Year in question,
the Plan Administrator may elect to treat all or any part of any such
contributions meeting the requirements of Treasury Regulations Section
1.401(k)-1(b)(3) as Salary Deferral Contributions to the extent
necessary to satisfy the Actual Deferral Percentage test of this
Section. Any Qualified Matching or Qualified Non-Elective Contributions
so applied shall not be included in the computation of the Actual
Contribution Percentage test requirements of Code Section 401(m)
otherwise applicable to such contributions.
3.05 Distribution of Excess Salary Deferral Contributions
Notwithstanding any other provision of this Plan, Excess
Salary Deferral Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Excess Salary Deferral Contributions were
allocated for the preceding Plan Year. Whenever possible, however, such
distributions shall be made within two and one-half months after the end of the
Plan Year during which the Excess Salary Deferral Contributions occurred. Such
distributions shall be made to Highly Compensated Employees on the basis of the
respective portions of the Excess Salary Deferral Contributions attributable to
each of such Employees under the
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<PAGE> 23
methodology described in Section 3.04(b) above. Excess Salary Deferral
Contributions shall be treated as Annual Additions under the Plan.
(a) Determination of Income or Loss. Excess Salary Deferral
Contributions shall be adjusted for any income or loss. The Plan
Administrator shall determine whether such adjustments shall include
the period from the end of the Plan Year in which the excess arose up
to the date of corrective distribution (the "gap period"). The income
or loss allocable to Excess Salary Deferral Contributions is the sum
of: (1) income or loss allocable to the Participant's Salary Deferral
Contribution Account (and, if applicable, the Qualified Non-Elective
Contribution Account or the Qualified Matching Contribution Account or
both) for the Plan Year multiplied by a fraction, the numerator of
which is such Participant's Excess Salary Deferral Contributions for
the year and the denominator of which is the Participant's Account
balance attributable to Salary Deferral Contributions (and Qualified
Non-Elective Contributions or Qualified Matching Contributions, or
both, if any of such contributions are included in the Actual Deferral
Percentage test) without regard to any income or loss occurring during
such Plan Year; and (2) if the corrective distribution is to be
adjusted for income or loss during the gap period, ten percent of the
amount determined under (1) multiplied by the number of whole calendar
months between the end of the Plan Year and the date of distribution,
counting the month of distribution if distribution occurs after the
15th of such month. Alternatively, the Plan Administrator may determine
the income or loss allocable to Excess Salary Deferral Contributions
under any reasonable method which does not violate the general
nondiscrimination rules of Code Section 401(a)(4), is used consistently
for all Participants and for all such corrective distributions under
the Plan for the Plan Year, and is used by the Plan for allocating
income to Participants' Accounts.
(b) Accounting for Excess Salary Deferral Contributions.
Excess Salary Deferral Contributions shall be distributed from the
Participant's Salary Deferral Contribution Account and Qualified
Matching Contribution Account (if applicable) in proportion to the
Participant's Salary Deferral Contributions and Qualified Matching
Contributions (to the extent used in the Actual Deferral Percentage
test) for the Plan Year. Excess Salary Deferral Contributions shall be
distributed from the Participant's Qualified Non-Elective Contribution
Account only to the extent that such Excess Salary Deferral
Contributions exceed the balance in the Participant's Salary Deferral
Contribution Account and Qualified Matching Contribution Account.
3.06 Qualified Non-Elective Contributions
The Employer may make Qualified Non-Elective Contributions
under the Plan on behalf of any or all Participants, or any or all Participants
who are Nonhighly Compensated Employees, in order to satisfy either the Actual
Deferral Percentage test or the Actual Contribution Percentage test. Such
contribution shall be in lieu of distributing Excess Salary Deferral
Contributions, as provided in Section 3.05 of the Plan, or Excess Aggregate
Contributions, as provided in Section 3.09 of the Plan. Qualified Non-Elective
Contributions shall be allocated to Participants' Accounts in the same
proportion that each Participant's
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<PAGE> 24
Compensation bears to the total Compensation of all Participants (or of all
Participants who are Nonhighly Compensated Employees, as applicable) for the
Plan Year for which the Employer makes the contribution.
3.07 Employer Matching Contributions
For each Plan Year, the Employer shall contribute to each
Participant's Account an Employer Matching Contribution in an amount determined
by the Board from time to time in its discretion and subject to the limitations
set forth herein. The Employer is not required to make Employer Matching
Contributions to the Plan for any Plan Year. To the extent that the Board
authorizes Employer Matching Contributions for a Plan Year, such contributions
shall be allocated as a percentage of Salary Deferral Contributions made for the
Plan Year.
Only Participants who have made Salary Deferral Contributions
during the Plan Year shall be eligible to share in the allocation of Employer
Matching Contributions. No Employer Matching Contributions shall be made,
however, with respect to Excess Salary Deferral Contributions, as defined in
Section 3.04 of the Plan.
3.08 Limitation Applicable to Employer Matching Contributions
(a) Definitions
For purposes of this Section, the following
definitions shall apply:
(1) "Actual Contribution Percentage," for each Plan
Year, means the average of the ratios (calculated separately
for each Eligible Employee) of:
(A) the Contribution Percentage Amounts
actually paid to the Trust Fund on behalf of each
such Eligible Employee, to
(B) the Eligible Employee's Compensation for
such Plan year for the period during which he was a
Participant in the Plan.
(2) "Aggregate Limit" shall mean the greater of:
(A) the sum of:
(i) 125 percent of the greater of
the Actual Deferral Percentage of the
Nonhighly Compensated Employees for the
preceding Plan Year or the Actual
Contribution Percentage of Nonhighly
Compensated Employees under the Plan subject
to Code Section 401(m) for the preceding
Plan Year, and
(ii) the lesser of 200% or two plus
the lesser of such Actual Deferral
Percentage or Actual Contribution
Percentage; or
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<PAGE> 25
(B) the sum of:
(i) 125% of the lesser of the Actual
Deferral Percentage of the Nonhighly
Compensated Employees for the preceding Plan
Year or the Actual Contribution Percentage
of Nonhighly Compensated Employees under the
Plan subject to Code Section 401(m) for the
preceding Plan Year, and
(ii) the lesser of 200% or two plus
the greater of such Actual Deferral
Percentage or Actual Contribution
Percentage.
(3) "Contribution Percentage Amounts" shall mean the
sum of the Matching Contributions and Qualified Matching
Contributions (to the extent not taken into account for
purposes of the Actual Deferral Percentage test) made under
the Plan on behalf of a Participant for the Plan Year. Such
Contribution Percentage Amounts shall include forfeitures of
Excess Aggregate Contributions allocated to the Participant's
Account, which shall be taken into account in the year in
which such forfeiture is allocated. In its discretion, the
Employer may make Qualified Non-Elective Contributions
designated for inclusion in the Contribution Percentage
Amounts. The Employer also may elect to designate Salary
Deferral Contributions as Contribution Percentage Amounts if
the Actual Deferral Percentage test is met before the Salary
Deferral Contributions are used in the Actual Contribution
Percentage test and such test continues to be met following
the exclusion of those Salary Deferral Contributions that are
used to meet the Actual Contribution Percentage test.
(4) "Excess Aggregate Contributions," with respect to
any Plan Year, means the excess of:
(A) the aggregate Contribution Percentage
Amounts taken into account in computing the Actual
Contribution Percentage of Highly Compensated
Employees for such Plan Year, over
(B) the maximum Contribution Percentage
Amounts permitted by the Actual Contribution
Percentage test (determined by reducing contributions
made on behalf of Highly Compensated Employees in the
order of their Actual Contribution Percentages,
beginning with the highest of such percentages).
Such determination shall be made after first determining
Excess Salary Deferral Contributions pursuant to Section 3.04.
After making such determination, the dollar amount of the
Excess Aggregate Contributions shall be determined. The Excess
Aggregate Contributions, on a dollar amount basis, shall then
be allocated to the Accounts of the Participants who are
Highly Compensated Employees with
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<PAGE> 26
the highest dollar amount of Contribution Percentage Amounts
allocated to their Accounts in the same manner as Excess
Contributions are allocated in Section 3.04(b) applicable to
Salary Deferral Contributions.
(5) "Matching Contribution" shall mean an Employer
contribution made to this or any other defined contribution
plan on behalf of a Participant on account of the
Participant's Salary Deferral Contributions under a Plan
maintained by the Employer.
(b) Actual Contribution Percentage Test. Unless the
requirements of Code Section401(m)(11) are satisfied for a Plan Year,
the Actual Contribution Percentage for Participants who are Highly
Compensated Employees for such Plan Year and the Actual Contribution
Percentage for Participants who are Nonhighly Compensated Employees for
the preceding Plan Year must satisfy one of the following tests:
(1) The Actual Contribution Percentage for
Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the Actual Contribution Percentage for
Participants who are Nonhighly Compensated Employees for the
preceding Plan Year multiplied by 1.25; or
(2) The Actual Contribution Percentage for
Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the lesser of: the Actual Contribution
Percentage for Participants who are Nonhighly Compensated
Employees for the preceding Plan Year multiplied by two (2),
or the Actual Contribution Percentage for Participants who are
Nonhighly Compensated Employees plus two (2) percentage
points.
(c) Multiple Use. If the sum of the Actual Deferral
Percentage and Actual Contribution Percentage of those Highly
Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, then the Actual Contribution Percentage of those
Highly Compensated Employees will be reduced (beginning with such
Highly Compensated Employee whose Contribution Percentage Amount is
the highest) so that the limit is not exceeded. The amount by which
each Highly Compensated Employee's Contribution Percentage Amount is
reduced shall be treated as an Excess Aggregate Contribution. The
Actual Deferral Percentage and Actual Contribution Percentage of the
Highly Compensated Employees are determined after any corrections
required to meet the Actual Deferral Percentage and Actual
Contribution Percentage tests, based on the assumption that the Actual
Deferral Percentage and Actual Contribution Percentage are the largest
amount permitted under Code Sections 401(k)(3) and 401(m)(2),
respectively. Multiple use does not occur if both the Actual Deferral
Percentage and Actual Contribution Percentage of the Highly
Compensated Employees do not exceed 1.25 multiplied by the Actual
Deferral Percentage and Actual Contribution Percentage of the
Nonhighly Compensated Employees.
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<PAGE> 27
3.09 Distribution of Excess Aggregate Contributions
Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable, distributed no later
than the last day of each such Plan Year to Participants to whose Accounts such
Excess Aggregate Contributions were allocated for the preceding Plan Year under
the rules of Section 3.08(a)(6). Excess Aggregate Contributions shall be treated
as Annual Additions under the Plan.
(a) Determination of Income or Loss. Excess Aggregate
Contributions shall be adjusted for any income or loss. The Plan
Administrator shall determine whether such adjustments shall include the
period from the end of the Plan Year in which the excess arose up to the
date of corrective distribution (the "gap period"). The income or loss
allocable to Excess Aggregate Contributions is the sum of: (1) income or
loss allocable to the Participant's Employer Matching Contribution
Account (if any, and only to the extent that amounts therein are not
used in the Actual Deferral Percentage test), and Qualified Non-Elective
Contribution Account and Salary Deferral Contribution Account if any
such amounts were used in calculating the Actual Contribution Percentage
test, for the Plan Year, multiplied by a fraction, the numerator of
which is such Participant's Excess Aggregate Contributions for the year
and the denominator of which is the portion of the Participant's Account
attributable to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and (2) if the
corrective distribution is to be adjusted for income or loss during the
gap period, ten percent of the amount determined under (1) multiplied by
the number of whole calendar months between the end of the Plan Year and
the date of distribution, counting the month of distribution if
distribution occurs after the 15th of such month. Alternatively, the
Plan Administrator may determine the income or loss allocable to Excess
Aggregate Contributions under any reasonable method which does not
violate the general nondiscrimination rules of Code Section 401(a)(4),
is used consistently for all Participants and for all such corrective
distributions under the Plan for the Plan Year, and is used by the Plan
for allocating income to Participant's Accounts.
(b) Forfeitures of Excess Aggregate Contributions. Forfeitures
of Excess Aggregate Contributions may either be reallocated to the
Accounts of Nonhighly Compensated Employees or applied to reduce
Employer contributions, as elected by the Employer.
(c) Accounting for Excess Aggregate Contributions. Excess
Aggregate Contributions shall be forfeited, if forfeitable, or
distributed on a pro-rata basis from the Participant's Employer
Matching Contribution Account and Qualified Matching Contribution
Account (and, if applicable, the Participant's Qualified Non-Elective
Contribution Account or Salary Deferral Contribution Account, or both).
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<PAGE> 28
3.10 Qualified Matching Contributions
If the Employer so elects, the Employer may make Employer
Matching Contributions to the Plan which are Qualified Matching Contributions.
Additional contributions subject to these rules may be made by the Employer, or
some or all of the existing Employer Matching Contributions can be designated as
vested and subject to the distribution restrictions, in order to satisfy these
rules.
3.11 Discretionary Employer Contributions
The Employer may make Discretionary Employer Contributions to
the Trust in such amounts as the Board shall determine from time to time in its
sole discretion. The Employer is not required to make Discretionary Employer
Contributions to the Plan for any Plan Year. To the extent that the Board
authorizes Discretionary Employer Contributions to the Plan for a Plan Year,
such contributions shall be allocated on the basis of the ratio of an eligible
Participant's Compensation to the Compensation of all eligible Participants
under the Plan.
A Participant is eligible to receive an allocation of
Discretionary Employer Contributions only if the Participant has completed at
least 500 Hours of Service during the Plan Year or is employed by the Employer
on the last day of the Plan Year. Notwithstanding anything herein to the
contrary, a Participant who terminates employment with the Employer during the
Plan Year by reason of death, Disability or attainment of Normal Retirement Age
shall share in the allocation of Discretionary Employer Contributions regardless
of whether he has completed 500 Hours of Service during the Plan Year. If the
Plan fails to satisfy the requirements of Code Sections 401(a)(4), 410(b) and,
prior to January 1, 1997, Code Section 401(a)(26), the 500 Hours of Service
requirement will be suspended for such Plan Year. If, after so doing, the Plan
still fails to satisfy the applicable Code requirement, the employment on the
last day of the Plan Year requirements shall also be suspended.
3.12 Forfeitures
As of each Accounting Date, the Plan Administrator shall use
any amounts which became forfeitures since the immediately preceding Accounting
Date first to reinstate previously forfeited Account balances of re-employed
former Participants (if any) in accordance with the restoration provisions of
Section 5.08. Any remaining forfeitures shall be used by the Employer to reduce
its contributions for the Plan Year in which the forfeiture occurs.
3.13 Voluntary Contributions and Qualified Voluntary Contributions
Prior to 1991, Participants were eligible to make after-tax
contributions to the Plan known as "Voluntary Contributions" and/or "Qualified
Voluntary Contributions." Participants are no longer permitted to make Voluntary
Contributions or Qualified Voluntary Contributions to the Plan.
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<PAGE> 29
Voluntary Contributions and Qualified Voluntary Contributions
shall remain in the Trust Fund until distributed to the Participant. Such
amounts shall be maintained in separate accounts which will be Nonforfeitable at
all times. The accounts, known as the "Voluntary Contributions Account" and
"Qualified Voluntary Contributions Account," as applicable, will share in gains
and losses of the Trust in accordance with Section 11.15. Subject to the consent
requirements of Article VI, a Participant may withdraw all or any part of his
Voluntary Contributions Account and his Qualified Voluntary Contributions
Account by making a request in the appropriate manner and form as required by
the Plan Administrator.
3.14 Rollover and Transfer Contributions
The Trustee is authorized to accept on behalf of an Employee,
and hold as part of the Trust Fund, assets from another plan qualified under
either Section 401(a) or Section 403(a) of the Code, provided that the Plan
Administrator approves such transfer. The Trustee shall also accept and hold as
part of the Trust Fund assets transferred from any other plan qualified under
either Section 401(a) or Section 403(a) of the Code in connection with a merger
or consolidation of such plan with or into the Plan pursuant to Section 14.06
hereof and as may be approved by the Plan Administrator. In addition, the
Trustee shall also accept "rollover" amounts contributed directly by or on
behalf of an Employee with the consent of the Plan Administrator in respect of a
previous distribution made to such Employee from another plan qualified under
either Section 401(a) or Section 403(a) of the Code. Amounts so transferred to
the Trust Fund may be referred to as "Transfer Contributions" or as "Rollover
Contributions", and may be held in a segregated subaccount referred to as the
"Transfer Contributions Account" or "Rollover Contributions Account," as the
case may be.
Rollover Contributions must conform to rules and procedures
established by the Plan Administrator, including rules designed to assure the
Plan Administrator that the funds so transferred qualify as a Rollover
Contribution under the Code. An Employee, prior to satisfying the Plan's
eligibility conditions, may make a Rollover Contribution to the Trust to the
same extent and in the same manner as a Participant. If an Employee makes a
Rollover Contribution to the Trust prior to satisfying the Plan's eligibility
conditions, the Employee must be treated as a Participant for all purposes of
the Plan, except that the Employee is not a Participant for purposes of making
Salary Deferral Contributions or sharing in Employer Matching Contributions or
Discretionary Employer Contributions under the Plan until he actually becomes a
Participant in the Plan. If the Employee has a Separation from Service prior to
becoming a Participant, the Trustee will distribute the segregated subaccount
attributable to the Employee's Rollover Contributions to the Employee as if it
were a Discretionary Employer Contribution Account.
3.15 Return of Contributions
Notwithstanding any other provision of the Plan,
(a) In the case of a contribution made by the Employer by a
mistake of fact, such contribution may be returned to the Employer
within one year after its payment to the Trust.
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<PAGE> 30
(b) All Employer contributions to the Plan are conditioned on
the allowance of their deductibility under Section 404 of the Code. If
the deduction of a contribution is disallowed, then to the extent of
disallowance, the contribution may be returned to the Employer within
one year after the disallowance.
(c) Any amounts returned under this Section shall be disposed
of as directed by the Plan Administrator through uniform and
nondiscriminatory rules. The Trustee shall not increase the amount of
any contribution returned under this Section for any earnings
attributable to the contribution, but the Trustee shall decrease the
Employer contribution returnable for any losses attributable to it.
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<PAGE> 31
ARTICLE IV
LIMITATIONS ON ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
4.01 Definitions
For purposes of this Article IV, the following definitions and
rules of interpretation shall apply:
(a) "Annual Additions" to a Participant's Account under
this Plan is the sum, credited to a Participant's
Account for any Limitation Year, of:
(1) Discretionary Employer Contributions, if
any;
(2) Salary Deferral Contributions;
(3) Employer Matching Contributions;
(4) Forfeitures, if any; and
(5) Excess amounts reapplied to reduce Employer
contributions under Section 4.02.
Except to the extent provided in Treasury
Regulations, Annual Additions include any excess contributions
described in Code Section 401(k), excess aggregate contributions
described in Code Section 401(m) and excess deferrals described in Code
Section 402(g), irrespective of whether the Plan distributes or
forfeits such excess amounts, and any other amounts prescribed in Code
Section 415 or the regulations thereunder.
(b) "Compensation" with respect to the Limitation Year means
wages, salaries, and fees for professional services and other amounts
received (without regard to whether or not an amount is paid in cash)
for personal services actually rendered in the course of employment
with the Employer to the extent that the amounts are includible in
gross income (including, not limited to) commissions paid salesmen,
compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits and
reimbursements or other expense allowances under a nonaccountable plan
(as described in 1.62-2(c)), and excluding the following:
(1) Employer contributions to a plan of deferred
compensation which are not includible in the Employee's gross
income for the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan, or any
distributions from a plan of deferred compensation;
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<PAGE> 32
(2) Amounts realized from the exercise of a
nonqualified stock option, or when restricted stock for
property held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of
forfeiture;
(3) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option;
and
(4) Other amounts which received special tax
benefits, or contributions made by the Employer (whether or
not under a salary reduction agreement) towards the purchase
of an annuity contract described in Section 403(b) of the Code
(whether or not the contributions are actually excludable from
the gross income of the Employee).
For purposes of applying the limitations of this
Article IV, Compensation for a Limitation Year is the Compensation
actually paid or includible in gross income during such Limitation
Year. Effective January 1, 1998, Compensation includes any elective
deferrals (as defined in Code Section 402(g)(3)) and any amounts
contributed or deferred at the Employee's election and which are not
includible in the gross income of the Employee by reason of Code
Section 125 or Section 457. In addition, Compensation for a Participant
in a Defined Contribution Plan who is permanently and totally disabled
(as defined in Section 22(e)(3) of the Code) is the Compensation such
Participant would have received for the Limitation Year if the
Participant had been paid at the rate of Compensation paid immediately
before becoming permanently and totally disabled. Effective for
Limitation Years beginning before January 1, 1999, such imputed
Compensation for the disabled Participant may be taken into account
only if the Participant is not a Highly Compensated Employee (as
defined in Section 414(q) of the Code) and contributions made on behalf
of such Participant are nonforfeitable when made.
(c) "Defined Benefit Plan" means a retirement plan that does
not provide for individual accounts for Employer contributions. The
Plan Administrator shall treat all Defined Benefit Plans (whether or
not terminated) maintained by the Employer as a single plan.
(d) "Defined Contribution Plan" means a retirement plan that
provides for an individual account for each Participant and for
benefits based solely on the amount contributed to the Participant's
account, and any income, expenses, gains and losses, and any
forfeitures of accounts of other Participants that the Plan
Administrator may allocate to such Participant's account. The Plan
Administrator shall treat as a Defined Contribution Plan an individual
medical account (as defined in Section 415(l)(2) of the Code) included
as part of a Defined Benefit Plan maintained by the Employer and, for
taxable years ending after December 31, 1985, a welfare benefit fund
under Section 419(e) of the Code maintained by the Employer to the
extent there are post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Section 419A(d)(3) of
the Code). The Plan Administrator shall treat all Defined Contribution
Plans (whether or not terminated) maintained by a Related Employer as a
single plan.
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<PAGE> 33
(e) "Limitation Year" means the Plan Year.
(f) "Maximum Permissible Amount" means, for a Limitation Year,
the maximum permissible amount with respect to any Participant shall be
the lesser of:
(1) $30,000 (or, the defined contribution dollar
limitation set forth in Section 415(c)(1)(A), as adjusted in
accordance with Section 415(d)), or
(2) twenty-five percent (25%) of the Participant's
Compensation for the Limitation Year.
The Compensation limitation in (1) above shall not
apply to any contribution for medical benefits (within the meaning of
Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise
treated as an Annual Addition.
If there is a short Limitation Year because of a
change in Limitation Year, the Plan Administrator will multiply the
$30,000 (or larger limitation) in (1) above by the following fraction:
Number of months in the short Limitation Year
12
Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant on the basis of a
reasonable estimation of the Participant's Compensation for the
Limitation Year, uniformly determined for all Participants similarly
situated. As soon as administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation Year
will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(g) "Projected Annual Benefit" means the annual retirement
benefit (adjusted to an actuarially equivalent straight life annuity if
the Plan expresses such benefit in a form other than a straight life
annuity or qualified joint and survivor annuity) to which a Participant
would be entitled under a Defined Benefit Plan on the assumption that
the Participant continues employment until the normal retirement age
(or current age, if later) thereunder, that his or her Compensation
continues at the same rate as in effect for the Limitation Year under
consideration until such age, and that all other relevant factors used
to determine benefits under the Defined Benefit Plan remain constant as
of the current Limitation Year for all future Limitation Years.
(h) For purposes of applying the limitations of Section
415(b), (c) and (e) of the Code applicable to a Participant for a
particular Limitation Year, all qualified Defined Benefit Plans
(without regard to whether a plan has been terminated) ever maintained
by the Company will be treated as one Defined Benefit Plan and all
qualified Defined
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<PAGE> 34
Contribution Plans (without regard to whether a plan has been
terminated) ever maintained by the Company will be treated as part of
this Plan.
4.02 Annual Addition Limitations
The amount of the Annual Addition that may be credited under
this Plan to any Participant's Account as of any allocation date shall not
exceed the Maximum Permissible Amount. If the Employer contribution that would
otherwise be contributed or allocated to the Participant's Account would cause
the Annual Additions for the Limitation Year to exceed the Maximum Permissible
Amount, the amount contributed or allocated will be reduced so that the Annual
Additions for the Limitation Year will equal the Maximum Permissible Amount.
If contributions to this Plan on behalf of a Participant are to be
reduced as a result of this Article IV, such reduction shall be effected by
first reducing the amount of any Salary Deferral Contributions and any earnings
thereon (along with any corresponding Employer Matching Contributions) on behalf
of such Participant, and then by reducing any Discretionary Employer
Contributions allocated to a Participant's Account on behalf of such
Participant. If, as a result of either (i) the allocation of forfeitures, or
(ii) a reasonable error in estimating a Participant's Compensation, (iii) a
reasonable error in estimating the amount of Salary Deferral Contributions that
may be made by a Participant under Code Section 415, or (iv) under the limited
facts and circumstances which the Commissioner of Internal Revenue Service finds
justify the availability of the rules set forth in this Section 4.02(a) through
(e) below, the allocation of Annual Additions under the terms of the Plan for a
particular Participant would cause the limitations of Section 415 of the Code
applicable to that Participant for the Limitation Year to be exceeded, the
excess amounts shall not be deemed to be Annual Additions in that Limitation
Year if they are treated as follows:
(a) The excess amounts in the Participant's Account consisting
of Salary Deferral Contributions and any increment attributable thereto
shall be paid to the Participant as soon as administratively feasible.
(b) The excess amounts in the Participant's Account consisting
of Discretionary Employer Contributions or Employer Matching
Contributions shall be used to reduce Discretionary Employer
Contributions or Employer Matching Contributions respectively for the
next Limitation Year (and succeeding Limitation Years, as necessary)
for that Participant if that Participant is covered by the Plan as of
the end of the Limitation Year. However, if that Participant is not
covered by the Plan as of the end of the Limitation Year, then the
excess amounts must be held unallocated in a suspense account for the
Limitation Year and allocated and reallocated in the next Limitation
Year to all of the remaining Participants in the Plan. If a suspense
account is in existence at any time during a particular Limitation
Year, other than the first Limitation Year described in the preceding
sentence, all amounts in the suspense account must be allocated and
reallocated to Participants' Accounts (subject to the limitations
of Section 415 of the Code) before any contributions that would
constitute Annual Additions may be made to the Plan for that Limitation
Year. Furthermore, the excess amounts must be used to reduce
Discretionary Employer Contributions and Employer Matching
Contributions for
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<PAGE> 35
the next Limitation Year (and succeeding Limitation Years, as
necessary) for all of the remaining Participants in the Plan. For
purposes of this subdivision, except as provided in Section 4.02(a),
excess amounts may not be distributed to Participants or former
Participants.
(c) In the event of termination of the Plan, the suspense
account described in paragraph (b) above, shall revert to the Company
to the extent it may not then be allocated to any Participant's
Account. Any such reversion shall be in accordance with the applicable
regulations under the Internal Revenue Code.
(d) Notwithstanding any other provisions in this Article IV,
the Company shall not contribute any amount that would cause an
allocation to the suspense account as of the date the contribution is
allocated. If the contribution is made prior to the date as of which it
is to be allocated, then such contribution shall not exceed an amount
that would cause an allocation to the suspense account if the date of
contribution were an allocation date.
(e) If a Participant's Annual Additions would result in an
excess amount for a Limitation Year, the excess amount will be deemed
to consist of the Annual Additions last allocated except that Annual
Additions attributable to a welfare benefit fund will be deemed to have
been allocated first regardless of the actual allocation date.
4.03 Overall Limitations
This Section applies to Limitation Years beginning before
January 1, 2000. If the Participant presently participates, or has ever
participated under a Defined Benefit Plan maintained by the Employer, then the
sum of the Defined Benefit Plan Fraction and the Defined Contribution Plan
Fraction for the Participant for that Limitation Year shall not exceed 1.0. If
in any Limitation Year the sum of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction on behalf of a Participant exceeds 1.0, then
the Employer shall reduce the Participant's Annual Addition under this Plan to
the extent necessary to prevent the sum of the Defined Contribution Plan
Fraction and the Defined Benefit Plan Fraction from exceeding 1.0.
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<PAGE> 36
(a) "Defined Benefit Plan Fraction" means:
the sum of Projected Annual Benefits of the Participant
under all Defined Benefit Plans (whether or not terminated)
maintained by the Company
------------------------------------------------
The lesser of (i) 125% of the dollar limitation in effect
under Section 415(b)(1)(A) and (d) of the Code for the Limitation
Year, or (ii) 140% of the Participant's average Compensation for the
three (3) consecutive years of Service during which
Compensation is highest, including any adjustment under
Section 415(b) of the Code.
(b) "Defined Contribution Plan Fraction" means:
the sum of the Annual Additions to the Participant's
Account under all Defined Contribution Plans (whether or not
terminated) maintained by the Company
-------------------------------------------------
the sum of the lesser of the following amounts determined
for the Limitation Year and for each prior year of
Service with the Employer: (i) 125% of the
dollar limitation determined under Section 415(b) and (d) of the Code
in effect under Section 415(c)(1)(A) of the Code for the Limitation
Year (determined without regard to the special dollar
limitations for employee stock ownership
plans), or (ii) 35% of the Participant's
Compensation for the Limitation Year.
4.04 Further Reductions of Contributions
In addition to any reductions and recharacterizations provided
for under the Plan, in any Plan Year in which the Plan Administrator deems it
necessary to do so to meet the requirements of this Article IV or the Code and
the regulations thereunder, the Plan Administrator may further reduce the amount
of Salary Deferral Contributions that may be made to a Participant's Account.
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<PAGE> 37
ARTICLE V
TERMINATION OF SERVICE; PARTICIPANT VESTING
5.01 Vesting
A Participant shall at all times be fully vested and have a
100% Nonforfeitable interest in his Salary Deferral Contributions Account and
any segregated subaccounts attributable to Rollover Contributions, Transfer
Contributions, Qualified Non-Elective Contributions, Qualified Matching
Contributions, Voluntary Contributions or Qualified Voluntary Contributions to
the Plan. A Participant's interest in his Employer Matching Contributions
Account and Discretionary Employer Contributions Account shall be fully vested
and Nonforfeitable at Normal Retirement Age (if employed by the Employer on or
after that date), upon the complete discontinuance of Employer contributions to
the Plan or upon the Participant's termination of employment with the Employer
as a result of his death or Disability. If a Participant's employment terminates
prior to Normal Retirement Age for any reason other than death or Disability,
then for each Year of Service he shall receive a Nonforfeitable percentage of
his Employer Matching Contributions Account and his Discretionary Employer
Contribution Account equal to the following:
Years of Service Nonforfeitable Percentage
- ---------------- -------------------------
Less than two (2) 0%
At least two (2) but less than three (3) 40%
At least three (3) but less than four (4) 60%
At least four (4) but less than five (5) 80%
Five (5) or more 100%
Notwithstanding the foregoing, certain Participants who (i)
were formerly participating in a qualified retirement plan of an entity which
was acquired by or merged with the Employer, or (ii) will receive a distribution
from the Plan due to the disposition by the Employer of its interest in a
subsidiary in accordance with Section 6.15(c) of the Plan, are subject to a
different vesting schedule as provided in Schedule II to the Plan.
5.02 Year of Service - Vesting
For purposes of vesting under Section 5.01, "Year of Service"
shall mean a Vesting Computation Period, as defined in Section 5.04 below,
during which an Employee completes not less than one thousand (1,000) Hours of
Service with the Employer. Participants shall not receive credit for Vesting
Computation Periods prior to the original Effective Date of the Plan of November
1, 1989.
Notwithstanding any other provision of the Plan, solely for
purposes of determining an Employee's Years of Service under this Section 5.02,
Hours of Service will be
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<PAGE> 38
credited to an Employee with respect to certain prior periods of employment with
entities which were acquired by the Employer, as specifically set forth in
Schedule I to the Plan.
5.03 Break in Service - Vesting
For purposes of this Article V, a Participant shall incur a
"Break in Service" if during any Vesting Computation Period he does not complete
more than five hundred (500) Hours of Service with the Employer.
5.04 Vesting Computation Period
"Vesting Computation Period" means the twelve (12) consecutive
month period used to measure Years of Service and Breaks in Service for purposes
of vesting. The twelve (12) consecutive month period used for the Vesting
Computation Period shall be the same period used for the Plan Year. The
Participant's initial Vesting Computation Period shall commence on the first day
of the Plan Year in which the Participant first completes an Hour of Service for
the Employer. If there is a change in the period covered by the Plan Year, the
Vesting Computation Period shall change to cover a corresponding period. The
first day of the new twelve (12) consecutive month Vesting Computation Period
shall begin within the prior Vesting Computation Period, so that the new period
overlaps the prior period. For purposes of vesting, in this overlapping period,
any Employee will be credited with: one (1) Year of Service if he accrues one
thousand (1,000) Hours of Service in only the prior Vesting Computation Period;
one (1) Year of Service if he accrues one thousand (1,000) Hours of Service in
only the new Vesting Computation Period; and two (2) Years of Service if he
accrues one thousand (1,000) Hours of Service in each of the two overlapping
Vesting Computation Periods.
5.05 Included Years of Service - Vesting
For purposes of determining "Years of Service" under Section
5.02, the Plan shall take into account all Years of Service an Employee
completes with the Employer except any Year of Service after the Participant
first incurs a Forfeiture Break in Service. The Participant incurs a "Forfeiture
Break in Service" after five (5) consecutive one-year Breaks in Service. The
exclusion of Years of Service after a Forfeiture Break in Service shall apply
for the sole purpose of determining a Participant's Nonforfeitable percentage of
his Employer Matching Contribution Account and his Discretionary Employer
Contribution Account accrued prior to the Forfeiture Break in Service.
5.06 Forfeiture Occurs
A Participant's forfeiture, if any, of his Employer Matching
Contribution Account and his Discretionary Employer Contribution Account shall
occur under the Plan as of the first to occur of:
(a) The last day of the Plan Year in which the Participant
first incurs a Forfeiture Break in Service;
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<PAGE> 39
(b) The date the Participant receives (or is deemed to
receive) a distribution of the Nonforfeitable percentage of his
Employer Matching Contribution Account and his Discretionary Employer
Contribution Account as a result of his termination of participation in
the Plan in accordance with Section 5.07, below.
The Plan Administrator shall determine the percentage of a
Participant's Employer Matching Contribution Account and his Discretionary
Employer Contribution Account forfeiture, if any, under this Section 5.06 solely
by reference to the vesting schedule of Section 5.01. A Participant shall not
forfeit any portion of his Employer Matching Contribution Account and his
Discretionary Employer Contribution Account for any other reason or cause except
as expressly provided by this Section 5.06.
5.07 Cash-Out Distributions to Partially-Vested Participants
If, pursuant to Article VI, a partially-vested Participant
receives a cash-out distribution before he incurs a Forfeiture Break in Service,
the cash-out distribution will result in an immediate forfeiture of the
nonvested portion of the Participant's Account balance derived from Employer
contributions. A partially vested Participant is a Participant whose
Nonforfeitable percentage as determined under Section 5.01 is less than 100%. A
cash-out distribution is a distribution of the entire Nonforfeitable portion of
the Participant's Account balance.
A "deemed" cash-out rule applies to a 0% vested Participant. A
0% vested Participant is a Participant whose Account balance derived from
Employer contributions is entirely forfeitable at the time of his Separation
from Service. If the Participant's Account is not entitled to an allocation of
Employer contributions for the Plan Year in which he has a Separation from
Service, the Plan Administrator will deem the 0% vested Participant to have
received a full distribution of his Account on the date of the Participant's
Separation from Service. For purposes of applying the restoration provisions of
Section 5.08, the Plan Administrator will deem the 0% vested Participant to have
repaid such distribution on his Reemployment Commencement Date.
5.08 Restoration of Forfeited Portion of Account
A Participant who is re-employed after receiving a cash-out
(or deemed cash-out) distribution of the Nonforfeitable percentage of his
Account shall have the right to repay the entire amount of the cash-out
distribution he received if the Plan Administrator must restore his Account
under the requirements of this Section 5.08.
(a) Restoration and Conditions upon Restoration. Subject to
the conditions of this Subsection, if the Participant repays his
distribution from the Plan, the Plan Administrator shall restore his
Account attributable to Employer contributions to the same dollar
amount as the dollar amount of such portion of his Account on the
Accounting Date, or other Valuation Date, immediately preceding the
date of the distribution or deemed distribution, unadjusted for any
gains or losses occurring
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<PAGE> 40
subsequent to that Accounting Date, or other Valuation Date.
Notwithstanding such repayment, the Plan Administrator shall not
restore a re-employed Participant's Account under the immediately
preceding sentence if:
(i) The Participant's Account was one hundred percent
(100%) Nonforfeitable at the time of the distribution; or
(ii) The Participant incurred a Forfeiture Break in
Service. This condition shall apply only if repayment is not
made before the earlier of five (5) years after the first date
on which the Participant is re-employed by the Employer, or
the close of the first period of five (5) consecutive one-year
Breaks in Service commencing after the distribution.
(b) Time and Method of Restoration. If neither of the two
conditions preventing restoration of the Participant's Account applies,
the Plan Administrator shall restore the Participant's Account as of
the last day of the Plan Year coincident with or immediately following
the repayment. To restore the Participant's Account, the Plan
Administrator, to the extent necessary, shall allocate to the
Participant's Account:
(i) First, the amount, if any, of Participant
forfeitures the Plan Administrator would otherwise allocate
under Section 3.12; and
(ii) Second, any additional Employer contributions
necessary to restore such amounts.
The Plan Administrator shall not take into account
the allocations under this Section 5.08 in applying the limitation on
allocations under Article IV.
(c) Segregated Account for Repaid Amount. Until the Plan
Administrator restores the Participant's Account, the Trustee may
invest the amount the Participant has repaid in a segregated Account
maintained solely for that Participant. The Trustee shall invest the
amount in such segregated Accounts in Federally insured
interest-bearing savings accounts, time deposits, or similar
investments. Until commingled with the balance of the Trust Fund on the
date the Plan Administrator restores the Participant's Account, the
Participant's segregated Account shall remain a part of the Trust, but
it alone shall share in any income it earns and it alone shall bear any
expense or loss it incurs. The Plan Administrator shall direct the
Trustee to repay to the Participant as soon as is administratively
practicable, the full amount of the Participant's segregated Account if
the Plan Administrator determines one or more of the conditions of
subparagraph (a) of this Section 5.08 prevents restoration as of the
applicable Accounting Date, notwithstanding the Participant's
repayment.
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ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 Benefits Upon Retirement, Disability or Separation from
Service
(a) Normal Retirement
Upon a Participant's Separation from Service after
attainment of Normal Retirement Age, the Plan Administrator shall
direct the Trustee to commence payment of the Participant's Account to
him (or to his Beneficiary if the Participant is deceased), in
accordance with the provisions of this Article VI, as soon as
administratively practicable, but not later than sixty (60) days after
the close of the Plan Year in which the Participant has Separation from
Service. Notwithstanding the foregoing, a Participant who continues to
be actively employed after attaining Normal Retirement Age may elect to
commence receiving his benefit as soon as practicable after attaining
Normal Retirement Age, even if the Participant continues in active
employment with the Employer. A Participant who remains in the employ
of the Employer after attaining Normal Retirement Age shall continue to
participate in Employer contributions.
(b) Disability or Separation from Service Prior to Normal
Retirement
Upon a Participant's Separation from Service prior to
attaining Normal Retirement Age due to the Participant's Disability or
for any other reason, the Plan Administrator shall direct the Trustee
to commence distribution of the Nonforfeitable portion of the
Participant's Account to him in accordance with the provisions of this
Article VI, as soon as administratively practicable after the
determination of Disability or the Participant's Separation from
Service, as applicable, subject to the notice and consent requirements
herein.
6.02 Notice Regarding Payment Options and Failure of Participant to
Make an Election
Not earlier than 90 days, but not later than 30 days (or 7
days, if the 30-day period is waived by the Participant), before the
Participant's Annuity Starting Date, notice shall be provided to a Participant
who is eligible to make a distribution election under the Plan. The "Annuity
Starting Date" is the first day of the first period for which an amount is paid
as an annuity or in any other form. The notice shall explain the optional forms
of benefit available under the Plan, including the material features and
relative values of those options, and the Participant's right to defer
distribution until he attains the later of Normal Retirement Age or age 62.
Where the Participant has the right to elect the form and
timing of his pension, but has failed to make an election, the Plan
Administrator shall direct the Trustee to commence
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distribution of the Participant's pension, in the form prescribed by Section
6.03, on the 60th day following the close of the Plan Year in which the latest
of the following events occur: (i) the Participant attains Normal Retirement
Age; (ii) the tenth anniversary of the year in which the Participant commenced
participation in the Plan; or (iii) the Participant incurs a Separation from
Service.
6.03 Method of Payment of Benefits at Retirement, Disability or
Separation from Service
Unless a Participant makes a valid waiver election pursuant to
Section 6.04 to receive an optional form of payment under Section 6.05, a
Participant shall be paid the Nonforfeitable portion of his Account in the form
of a "Qualified Joint and Survivor Annuity." If, as of the Annuity Starting
Date, the Participant is married, a Qualified Joint and Survivor Annuity is an
immediate annuity payable monthly for the life of the Participant, and a
survivor annuity payable monthly for the remaining life of the Participant's
surviving spouse that is 50% of the amount of the annuity payable during the
life of the Participant. If, as of the Annuity Starting Date, the Participant is
not married, a Qualified Joint and Survivor Annuity is an immediate life annuity
for the Participant. The Qualified Joint and Survivor Annuity shall be in the
form of an irrevocable immediate annuity contract purchased from an insurer with
the Nonforfeitable portion of the Participant's Account.
6.04 Waiver Election - Qualified Joint and Survivor Annuity
Not earlier than ninety (90) days, but not later than thirty
(30) days (or seven (7) days, if the thirty (30) day period is waived by the
Participant), before the Participant's Annuity Starting Date, the Participant
shall be provided with a written explanation of the terms and conditions of the
Qualified Joint and Survivor Annuity, the Participant's right to make, and the
effect of, an election to waive the Qualified Joint and Survivor Annuity form of
benefit, the rights of the Participant's spouse regarding the waiver election,
and the Participant's right to make, and the effect of, a revocation of a waiver
election. The Plan does not limit the number of times the Participant may revoke
a waiver of the Qualified Joint and Survivor Annuity or make a new waiver during
the election period.
A married Participant's waiver election is not valid unless
(a) the Participant's spouse (to whom the survivor annuity is payable under the
Qualified Joint and Survivor Annuity) has consented in writing to the waiver
election, the spouse's consent acknowledges the effect of the election, and a
notary public witnesses the spouse's consent; (b) the spouse consents to the
alternate form of payment designated by the Participant or to any change in that
designated form of payment; and (c) unless the spouse is the Participant's sole
primary Beneficiary, the spouse consents to the Participant's Beneficiary
designation or to any change in the Participant's Beneficiary designation. The
spouse's consent to a waiver of the Qualified Joint and Survivor Annuity is
irrevocable, unless the Participant revokes the waiver election. The spouse may
execute a blanket consent to any form of payment designation or to any
Beneficiary designation made by the Participant, if the blanket consent
acknowledges the spouse's right to limit that consent to a specific designation
but, in writing, waives such right. The consent requirements of
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the Section 6.04 apply to a former spouse to the extent required under a
qualified domestic relations order as defined in Code Section 414(p).
The Plan Administrator may accept as valid a waiver election which does
not satisfy the spousal consent requirements of this Section if the Plan
Administrator establishes the Participant does not have a spouse, the Plan
Administrator is not able to locate the Participant's spouse, or other
circumstances exist under which the Secretary of the Treasury will excuse the
consent requirement. If the Participant's spouse is legally incompetent to give
consent, the spouse's legal guardian (even if the guardian is the Participant)
may give consent.
6.05 Optional Forms of Payment
Subject to the cash-out provisions of Section 6.06 and the
consent requirements applicable to distributions under Section 6.04, in lieu of
the Qualified Joint and Survivor Annuity, a Participant may elect to receive
payment of benefits in one of the optional forms of benefit described below. The
election of an optional form of payment shall be in the form and manner
prescribed by the Plan Administrator, and if in accordance with the conditions
set forth below, it shall become effective as of his Annuity Starting Date and
cannot be revoked or changed once it has become effective.
(a) Lump Sum Option - A single lump sum payment of the value
of the Nonforfeitable portion of the Participant's Account.
(b) Installment Option - Payment in monthly, quarterly,
semi-annual, or annual installments over a fixed reasonable period of
time, not exceeding (i) the life expectancy of the Participant, or (ii)
the joint and last survivor expectancy of the Participant and an
individual the Participant designates as his Beneficiary.
To facilitate installment payments elected by the Participant
under this Section 6.05, the Plan Administrator, in its sole discretion, may
direct the Trustee to segregate all or any part of the Participant's Account in
a separate account. The Plan Administrator may direct the Trustee to invest the
Participant's segregated account in Federally insured interest bearing savings
account(s) or time deposit(s) (or a combination of both), or in other fixed
income investments. A segregated account shall remain a part of the Trust, but
it alone shall share in any income it earns, and it alone shall bear any expense
or loss it incurs.
6.06 Cash-Out of Small Amounts
Notwithstanding anything in this Article VI to the contrary,
if the Nonforfeitable portion of the Participant's Account is not greater than
$5,000 (prior to 1998, $3,500) such Nonforfeitable portion of the Account shall
be paid to the Participant in a lump sum as soon as practicable following his
Separation from Service. If the Nonforfeitable portion of the Participant's
Account is zero, the Participant shall be deemed to have received a payment of
the entire Nonforfeitable portion of his Account under the Plan as of his
Separation from Service. A
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payment (or deemed payment) under this Section 6.06 shall be in full settlement
of the Participant's benefits under the Plan.
6.07 Required Beginning Date
Effective January 1, 1997, for purposes of this Article VI,
for any person who is not a "5% owner" (as defined in Section 416(i) of the
Code) the "Required Beginning Date" is the April 1 of the calendar year
following the calendar year in which the later of retirement or attainment of
age 70 1/2 occurs. The Required Beginning Date of a Participant who is a 5%
owner is the April 1 immediately following the calendar year in which the
Participant attains age 70 1/2 regardless of whether the Participant has
retired.
Notwithstanding the foregoing, a Participant who attained age
70 1/2 during 1997 or 1998 may elect to receive his benefit no later than April
1 of the calendar year following the calendar year in which such Participant
attains age 70 1/2, regardless of such Participant's employment status.
6.08 Minimum Distribution Requirements
(a) Minimum Distribution Requirements for Participants. The
Plan Administrator shall not direct the Trustee to distribute the
Nonforfeitable portion of a Participant's Account, nor may the
Participant elect to have the Trustee distribute the Nonforfeitable
portion of his Account, under a method of payment which, as of the
Required Beginning Date, does not satisfy the minimum distribution
requirements under Code Section 401(a)(9) and the applicable Treasury
regulations.
(1) The minimum distribution for a calendar year
equals the Nonforfeitable portion of the Participant's Account
as of the latest Valuation Date preceding the beginning of the
calendar year, divided by the Participant's life expectancy
or, if applicable, the joint and last survivor expectancy of
the Participant and his designated Beneficiary (subject to the
requirements of the regulations under Code Section 401(a)(9)).
(2) The Plan Administrator will increase the
Nonforfeitable portion of the Participant's Account, as
determined on the relevant Valuation Date, for contributions
(to the extent Nonforfeitable) allocated after the Valuation
Date and by December 31 of the applicable calendar year. For
purposes of this valuation, the Plan Administrator will treat
any portion of the minimum distribution for the first
distribution calendar year made after the close of that year
as a distribution occurring in that first distribution
calendar year.
(3) Upon the Participant's written request, the Plan
Administrator will compute the minimum distribution for a
calendar year subsequent to the first calendar year for which
the Plan requires a minimum distribution by redetermining the
applicable life expectancy. However, the Plan Administrator
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may not redetermine the joint life and last survivor
expectancy of the Participant and a nonspouse designated
Beneficiary in a manner which takes into account any
adjustment to a life expectancy other than the Participant's
life expectancy.
(4) If the Participant's spouse is not his designated
Beneficiary, a method of payment to the Participant may not
provide more than incidental benefits to the Beneficiary. The
Plan must satisfy the minimum distribution incidental benefit
("MDIB") requirement in the Treasury regulations issued under
Section 401(a)(9) of the Code for distributions made on or
after the Participant's Required Beginning Date and before the
Participant's death.
(5) The minimum distribution for the first
distribution calendar year is due by the Participant's
Required Beginning Date. The minimum distribution for each
subsequent distribution calendar year, including the calendar
year in which the Participant's Required Beginning Date falls,
is due by December 31 of that year.
(b) Minimum Distribution Requirements for Beneficiaries. The
method of distribution to the Participant's Beneficiary must satisfy
Section 401(a)(9) of the Code and the applicable Treasury regulations.
(1) If the Participant's death occurs after his
Required Beginning Date or, if earlier, the date the
Participant commences an irrevocable annuity pursuant to
Section 6.03, the method of payment to the Beneficiary must
provide for completion of payment over a period which does not
exceed the payment period which had commenced for the
Participant. If the Participant's death occurs prior to his
Required Beginning Date, and the Participant had not commenced
an irrevocable annuity pursuant to Section 6.03, the method of
payment to the Beneficiary, subject to Section 6.03, must
provide for completion of payment to the Beneficiary over a
period not exceeding:
(A) five (5) years after the date of the
Participant's death; or
(B) if the Beneficiary is a designated
Beneficiary, the designated Beneficiary's life
expectancy.
(2) The Plan Administrator may not direct payment of
the Nonforfeitable portion of the Participant's Account over a
period described in clause (B) above unless the Trustee will
commence payment to the designated Beneficiary no later than
the December 31 following the close of the calendar year in
which the Participant's death occurred or, if later, and the
designated Beneficiary is the Participant's surviving spouse,
December 31 of the calendar year in which the Participant
would have attained age 70 1/2. If the Trustee will make
distribution in accordance with clause (B), the minimum
distribution for a calendar year equals the Nonforfeitable
portion of the Participant's Account as of
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<PAGE> 46
the latest Valuation Date preceding the beginning of the
calendar year, divided by the designated Beneficiary's life
expectancy. The Plan Administrator shall use the unisex life
expectancy multiples under Treasury Regulation Section1.72-9
for purposes of applying this paragraph.
(3) The Plan Administrator, only upon the written
request of the Participant or of the Participant's surviving
spouse, will recalculate the life expectancy of the
Participant's surviving spouse not more frequently than
annually, but may not recalculate the life expectancy of a
nonspouse designated Beneficiary, after the Trustee commences
payment to the designated Beneficiary. If applicable, the Plan
Administrator will apply this paragraph by treating any amount
paid to the Participant's child which becomes payable to the
Participant's surviving spouse upon the child's attaining the
age of majority, as paid to the Participant's surviving
spouse.
(4) Upon the Beneficiary's written request, the Plan
Administrator shall direct the Trustee to accelerate payment
of all, or any portion, of the Participant's unpaid Account,
as soon as administratively practicable following the
effective date of that request.
6.09 Participant Benefit Payment Election
The Plan Administrator shall permit a Participant to elect any
one of the forms of payment of the Nonforfeitable portion of the Participant's
Account described in Sections 6.03 and 6.05, subject to the consent requirements
of Section 6.04. A Participant also may elect the form and timing of payment of
the Nonforfeitable portion of his Account to his Beneficiaries subject to the
distribution requirements of Section 6.08. The Participant shall make an
election under this Section 6.09 by submitting the election in the form and
manner required by the Plan Administrator within a reasonable time before the
payment of the Nonforfeitable portion of the Participant's Account would
otherwise commence under the Plan. The Plan Administrator shall apply the
provisions of this Section 6.09 in a nondiscriminatory and uniform manner.
In no event shall the Plan Administrator direct the Trustee to
commence payment later than the time prescribed by this Article VI or in a form
not permitted under Article VI. The Plan Administrator shall make its
determinations under this Article VI in a nondiscriminatory, consistent and
uniform manner. If the Plan Administrator directs the Trustee to commence
payment to the Participant under this Article VI, it shall provide the
Participant (and, if applicable, the Participant's spouse) with the appropriate
form to consent to the distribution direction, if required.
6.10 Reemployment of Participants Receiving Payments
In the event that a Participant who is receiving installment
or annuity payments is re-employed by the Employer, such Participant shall
continue to receive such payments in accordance with the method of payment in
effect prior to his reemployment. Payments of
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installments shall be drawn from the Participant's entire Account, including any
contributions allocated to his Account after his re-employment. At the time of
his subsequent termination of employment, a Participant who is receiving annuity
payments shall be required to make a new election regarding the distribution of
his Account attributable to the period of his reemployment, in accordance with
the requirements of this Article VI.
6.11 Lost Participant or Beneficiary
The Account of a Participant shall be forfeited if the Plan
Administrator, after reasonable effort, is unable to locate the Participant or
his Beneficiary to whom payment is due. The amount shall be allocated as a
forfeiture pursuant to Section 3.12. However, any such forfeited Account will be
reinstated and become payable if a claim is made by the Participant or
Beneficiary for such Account. The Plan Administrator shall prescribe uniform and
nondiscriminatory rules for carrying out this provision.
6.12 Facility of Payment
If the Plan Administrator deems any person entitled to receive
any amount under the provisions of this Plan incapable of receiving or
disbursing the same by reason of minority, illness or infirmity, mental
incompetency, or incapacity of any kind, the Plan Administrator may, in its sole
discretion, direct the Trustee to take any one or more of the following actions:
(a) To apply such amount directly for the comfort, support and
maintenance of such person;
(b) To reimburse any person for any such support theretofore
supplied to the person entitled to receive any such payment;
(c) To pay such amount to any person selected by the Plan
Administrator to disburse it for such comfort, support and maintenance,
including without limitation, any relative who has undertaken, wholly
or partially, the expense of such person's comfort, care and
maintenance, or any institution in whose care or custody the person
entitled to the amount may be. The Plan Administrator may, in its
discretion, deposit any amount due to a minor to his credit in any
savings or commercial bank of the Plan Administrator's choice.
6.13 Distributions Under Domestic Relations Orders
Nothing contained in this Plan shall prevent the Trustee, in
accordance with the direction of the Plan Administrator, from complying with the
provisions of a qualified domestic relations order (as defined in Section 414(p)
of the Code).
This Plan specifically permits distribution to an alternate
payee under a qualified domestic relations order at any time, irrespective of
whether the Participant has attained his earliest retirement age (as defined
under Section 414(p) of the Code) under the Plan. A distribution to
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<PAGE> 48
an alternate payee prior to the Participant's attainment of earliest retirement
age is available only if: (1) the order specifies distribution at that time or
permits an agreement between the Plan and the alternate payee to authorize an
earlier distribution; and (2) if the present value of the alternate payee's
benefits under the Plan exceeds $5,000, and the order requires, the alternate
payee consents to any distribution occurring prior to the Participant's
attainment of earliest retirement age. Nothing in this Section 6.13 gives a
Participant a right to receive distribution at a time otherwise not permitted
under the Plan nor does it permit the alternate payee to receive a form of
payment not otherwise permitted under the Plan.
The Plan Administrator shall establish reasonable procedures
to determine the qualified status of a domestic relations order. Upon receiving
a domestic relations order, the Plan Administrator promptly shall notify the
Participant and any alternate payee named in the order, in writing, of the
receipt of the order and the Plan's procedures for determining the qualified
status of the order. Within a reasonable period of time after receiving the
domestic relations order, the Plan Administrator shall determine the qualified
status of the order and shall notify the Participant and each alternate payee,
in writing, of its determination. The Plan Administrator shall provide notice
under this paragraph by mailing to the individual's address specified in the
domestic relations order, or in a manner consistent with Department of Labor
regulations.
If any part of the Nonforfeitable portion of the Participant's
Account is payable during the period the Plan Administrator is making its
determination of the qualified status of the domestic relations order, the Plan
Administrator shall direct the Trustee to segregate the amounts payable in a
separate account and to invest the segregated account solely in fixed income
investments or to maintain a separate bookkeeping account of said amounts. If
the Plan Administrator determines the order is a qualified domestic relations
order within eighteen (18) months of the first date on which payments were due
under the terms of the order, the Plan Administrator shall direct the Trustee to
distribute the separate account in accordance with the order. If the Plan
Administrator does not make its determination of the qualified status of the
order within the above-described eighteen (18) month period, the Plan
Administrator shall direct the Trustee to distribute the segregated account in
the manner the Plan would distribute it if the order did not exist, and shall
apply the order prospectively if the Plan Administrator later determines the
order is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the
qualified domestic relations order, the Plan Administrator may direct the
Trustee to invest the partitioned amount in a segregated subaccount or separate
account and to invest the account in Federally insured, interest-bearing savings
account(s) or time deposit(s) (or a combination of both), or in other fixed
income investments. A segregated subaccount shall remain a part of the Trust,
but it alone shall share in any income it earns, and it alone shall bear any
expense or loss it incurs.
The Trustee shall make any payment or distributions required
under this Section 6.13 by separate benefit checks or other separate
distribution to the alternate payee(s).
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6.14 Withholding on Distributions
Distributions under this Plan shall be subject to Federal
income tax withholding as prescribed by Section 3405 of the Code and the
regulations thereunder.
6.15 No Distribution Prior to Separation from Service, Death or
Disability
Except as provided below, Salary Deferral Contributions and
income allocable thereon are not distributable to a Participant or to his
Beneficiary earlier than upon Separation from Service, death or Disability.
Such amounts may also be distributed upon:
(a) Termination of the Plan without the establishment of
another "defined contribution plan" (as defined in the Code and
applicable Treasury Regulations).
(b) The disposition by a corporation to an unrelated
corporation of substantially all of the assets (within the meaning of
Section 409(d)(2) of the Code) used in a trade or business of such
corporation if such corporation continues to maintain this Plan after
the disposition, but only with respect to Employees who continue
employment with the corporation acquiring such assets.
(c) The disposition by a corporation to an unrelated entity of
such corporation's interest in a subsidiary (within the meaning of
Section 409(d)(3) of the Code) if such corporation continues to
maintain this Plan, but only with respect to Employees who continue
employment with such subsidiary.
All distributions that may be made pursuant to one or more of
the foregoing distributable events are subject to the spousal and Participant
consent requirements contained in Code Section 401(a)(11) and 417.
6.16 Eligible Rollover Distributions
(a) Notwithstanding any provisions of the Plan to the contrary
that would otherwise limit a Distributee's election under this Section,
a Distributee may elect, at the time and in the manner prescribed by
the Plan Administrator, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by
the Distributee in a Direct Rollover. The Plan Administrator may
establish rules and procedures governing the processing of Direct
Rollovers and limiting the amount or number of such Direct Rollovers in
accordance with applicable Treasury regulations. Distributions not
transferred to an Eligible Retirement Plan in a Direct Rollover shall
be subject to income tax withholding as provided under the Code and
applicable state and local laws, if any.
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<PAGE> 50
(b) Definitions
(1) "Eligible Rollover Distribution" means any
distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover
Distribution does not include: any distribution that is one of
a series of substantially equal periodic payments (not less
frequently than annually) made for life (or life expectancy)
of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's
designated beneficiary, or for a specified period of ten years
or more; any distribution to the extent such distribution is
required under Code Section 401(a)(9); and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(2) "Eligible Retirement Plan" means an individual
retirement account described in Code Section 408(a), an
individual retirement annuity described in Code Section
408(b), an annuity plan described in Code Section 403(a), or a
qualified trust described in Code Section 401(a), that accepts
the Distributee's Eligible Rollover Distribution. However, in
the case of an Eligible Rollover Distribution to the surviving
spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
(3) "Distributee" means an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's
spouse or former who is the alternate payee under a qualified
domestic relations order, as defined in Code Section 414(p),
are Distributees with regard to the interest of the spouse or
former spouse.
(4) "Direct Rollover" means a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
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ARTICLE VII
PRE-RETIREMENT DEATH BENEFITS
7.01 Benefit Payable in the Event of Death Before Benefit Commencement
Date
The Account balance of a Participant who dies while employed
by the Employer shall become fully Nonforfeitable upon the Participant's death.
A pre-retirement death benefit equal to the Nonforfeitable value of the
Participant's Account shall be paid to the Beneficiary of such Participant. Such
Beneficiary shall be entitled to commence such death benefit as of the first day
of any month after the Participant's death. Notwithstanding the foregoing, in
the case of a Participant who was married on the date of his death, the death
benefit shall be a Qualified Pre-retirement Survivor Annuity payable to the
surviving spouse, unless the Participant has made a valid waiver election
pursuant to Section 7.02, or the surviving spouse elects another form of
payment. The "Qualified Pre-retirement Survivor Annuity" is a single life
annuity which is 50% of the Nonforfeitable value of the Participant's Account
and which is payable for the life of the surviving spouse. The value of the
Qualified Pre-retirement Survivor Annuity is attributable to Employer
contributions and Employee contributions in the same proportion that the
Participant's Account is attributable to those contributions. The portion of the
Participant's Account which is not payable to the Participant's spouse under
this Section 7.01 is payable to the Participant's designated Beneficiary, in
accordance with the other provisions of this Article VII. If the present value
of the Qualified Pre-retirement Survivor Annuity does not exceed $5,000 (prior
to 1998, $3,500), the Plan Administrator shall direct the payment of such
survivor benefits in a lump sum payment in lieu of the Qualified Pre-retirement
Survivor Annuity.
7.02 Waiver Election for Married Participants
A written explanation of the Qualified Pre-retirement Survivor
Annuity shall be provided to each married Participant, within whichever of the
following periods ends last: (1) the period beginning on the first day of the
Plan Year in which the Participant attains age 32 and ending on the last day of
the Plan Year in which the Participant attains age 34; (2) a reasonable period
after an Employee becomes a Participant; (3) a reasonable period after the joint
and survivor rules become applicable to the Participant; or (4) a reasonable
period after a fully subsidized Qualified Pre-retirement Survivor Annuity no
longer satisfies the requirements for a fully subsidized benefit. A reasonable
period described in clauses (2), (3) and (4) is the period beginning one year
before and ending one year after the applicable event. If the Participant has a
Separation from Service before attaining age 35, clauses (1), (2), (3) and (4)
do not apply, and the written explanation shall be provided within the period
beginning one year before and ending one year after the Separation from Service.
The written explanation shall describe, in a manner consistent with Treasury
Regulations under the Code, the terms and conditions of the Qualified
Pre-retirement Survivor Annuity in a manner which is comparable to the
explanation of the Qualified Joint and Survivor Annuity required under Article
VI. The Plan does not limit the number of times the Participant may revoke a
waiver of the Qualified Pre-retirement Survivor Annuity or make a new waiver
during the election period.
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A Participant's waiver election of the Qualified
Pre-retirement Survivor Annuity is not valid unless (a) the Participant makes
the waiver election no earlier than the first day of the Plan Year in which he
attains age 35, and (b) the Participant's spouse (to whom the Qualified
Pre-retirement Survivor Annuity is payable) satisfies the consent requirements
described in this Article VII, except the spouse need not consent to the form of
benefit payable to the designated Beneficiary. The spouse's consent to the
waiver of the Qualified Pre-retirement Survivor Annuity is irrevocable, unless
the Participant revokes the waiver election.
Notwithstanding the time of election requirement of clause (1)
above, a Participant who will not yet attain age 35 as of the end of any current
Plan Year may make a special qualified election to waive the Qualified
Pre-retirement Survivor Annuity for the period beginning on the date of such
election and ending on the first day of the Plan Year in which the Participant
will attain age 35. Such election will not be valid unless the Participant
receives a written explanation of the Qualified Pre-retirement Survivor Annuity
in a manner which is comparable to the explanation of the Qualified Joint and
Survivor Annuity required under Article VI, and the Participant's spouse
consents to the waiver election. Qualified Pre-retirement Survivor Annuity
coverage will be automatically reinstated as of the first day of the Plan Year
in which the Participant attains age 35. Any new waiver on or after such date
shall be subject to the full requirements of this Section 7.02.
7.03 Timing and Form of Distributions
With regard to any Qualified Pre-retirement Survivor Annuity
or other death benefit, the Participant's surviving spouse or other Beneficiary
may elect to commence payment of such death benefit at any time following the
date of the Participant's death, but not later than the applicable mandatory
distribution period described in Section 6.08. Subject to the requirements of
this Section, the Participant's death benefit shall be distributed, as elected
by the Participant or, if the Participant did not select a method of payment, as
elected by the surviving spouse or other Beneficiary, in accordance with Article
VI.
In the absence of an election by the surviving spouse or other
Beneficiary, any death benefit other than the Qualified Pre-retirement Survivor
Annuity shall be distributed on the first distribution date following the close
of the Plan Year in which the latest of the following events occurs: (i) the
Participant's death; (ii) the date the Plan Administrator receives notification
of or otherwise confirms the Participant's death; (iii) the date the Participant
would have attained Normal Retirement Age; or (iv) the date the Participant
would have attained age 62; but such death benefit shall not be distributed
later than the applicable mandatory distribution period described in Section
6.08.
7.04 Cash-Out of Small Death Benefit Amounts
Notwithstanding anything in this Article VII to the contrary,
if the Nonforfeitable value of the Participant's Account does not exceed $5,000
(prior to 1998, $3,500), such Account value shall be paid in one lump sum to the
surviving spouse or other Beneficiary as soon as
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practicable following the death of the Participant. Such payment shall be in
full settlement of the benefit that otherwise would be payable under this
Article VII.
7.05 Designation of Beneficiary
Any Participant may from time to time designate, in writing,
any person or persons, contingently or successively, to whom the Trustee shall
pay his Account (including any life insurance proceeds payable to the
Participant's Account) in the event of his death. A Participant's Beneficiary
designation shall not be valid unless the Participant's spouse consents (in
accordance with the requirements of Section 417 of the Code) to the Beneficiary
designation. A Participant's Beneficiary designation does not require spousal
consent if the Participant's spouse is the Participant's designated Beneficiary.
The Plan Administrator shall prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the Plan
Administrator, it effectively shall revoke all designations filed prior to that
date by the same Participant.
7.06 Failure of Beneficiary Designation
If a Participant fails to name a Beneficiary in accordance
with Section 7.05, or if the Beneficiary named by a Participant predeceases him,
then the Trustee shall pay the Participant's Account in a single lump sum in the
following order of priority to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted
children, in equal shares;
(c) The Participant's surviving parents, in equal shares; or
(d) The legal representative of the estate of the last to die
of the Participant and his Beneficiary.
If the Beneficiary survives the Participant but dies before
complete distribution of the Participant's Account, the remaining portion of the
Participant's Account shall be paid in a lump sum to any contingent
Beneficiaries named by the Participant or, if there be none, to the legal
representative of the estate of such deceased Beneficiary. The Plan
Administrator shall direct the Trustee as to the method and to whom the Trustee
shall make payment under this Section 7.06.
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ARTICLE VIII
LOANS; IN-SERVICE WITHDRAWALS
8.01 Loans
The Trustee may, pursuant to the direction and approval of the
Plan Administrator, make a loan to a Participant pursuant to the terms of this
Article. Such loans shall be made on the written application of the Participant
and on such terms and conditions as are set forth in this Article and in
policies and procedures established by the Plan Administrator. In making such
loans, the Plan Administrator shall follow uniform policies and shall not
discriminate in favor of or against any Participant or group of Participants.
For purposes of this Section 8.01, the term Participant shall not include former
participants, except former Participants who are "parties-in-interest" as
defined in ERISA.
(a) Maximum Loan Amount. In no event shall any loan made to a
Participant pursuant to this Section be in an amount which shall cause
the outstanding aggregate balance of all loans made to such Participant
under this Plan and all other plans maintained by the Employer or any
Related Employer to exceed the lesser of:
(1) $50,000, reduced by the excess (if any) of: (1)
the highest outstanding balance of loans from the Plan and all
other plans of the Employer or any Related Employers to the
Participant during the one-year period ending on the day
before the date on which the loan is made; over (2) the
outstanding balance of loans from the Plan and all other plans
of the Employer and all other Related Employers to the
Participant on the date on which the loan is made; or
(2) one-half of the Nonforfeitable portion of the
Participant's Account balance in the Plan attributable to
Employer contributions, Voluntary Contributions (if any) and
Rollover Contributions.
For purposes of this Section, the balances of the
Accounts in this Plan and the accounts or accrued benefit in each other
qualified plan of the Employer or any Related Employer shall be
determined immediately after the origination of the loan.
(b) Repayment of Loan. All loans must provide for periodic
repayment of principal and interest in level installments by payroll
deduction. The period of repayment for each loan made pursuant to this
Section shall be arrived at by mutual agreement between the Plan
Administrator and the borrower, provided that any such loan shall
mature and be payable, in full and with interest, within no more than
five years from the date such loan is made, unless the loan is used to
acquire a dwelling unit that within a reasonable time (determined at
the time the loan is made) will be used as the principal residence of
the Participant.
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8.02 Loan Terms and Conditions
In addition to such rules and regulations as the Plan
Administrator may adopt, all loans to Participants shall comply with the
following terms and conditions:
(a) An application by a Participant for a loan shall be made
in writing to the Committee, whose action thereon shall be final.
(b) Loans shall be available to all Participants on a
reasonably equivalent basis. Loans shall not be made available to
Participants who are Highly Compensated Employees in an amount greater
than the amount made available to all other Participants.
(c) Loans shall bear interest at a reasonable rate to be fixed
by the Trustee based on interest rates currently being charged by
commercial lending institutions for similar loans at the time the loan
is approved by the Plan Administrator. The Plan Administrator shall not
discriminate among Participants in the matter of interest rates, but
loans granted at different times may bear different interest rates
based on prevailing rates at the time of origination.
(d) Loan funds shall be taken only from the Participant's
Account, provided, however, that loan funds shall not be obtainable
from any portion of an Account that is invested in life insurance or
annuity contracts.
(e) Each loan shall be made against collateral, including the
assignment of one-half of the present value of the Nonforfeitable
portion of the Participant's Account, as security for the aggregate
amount of all loans made to such Participant, supported by the
borrower's collateral promissory note for the amount of the loan,
including interest, payable to the order of the Trustee. The Plan
Administrator may require loans used to acquire a Participant's
principal residence to be secured by a duly executed and recorded
mortgage on the principal residence acquired by the Participant with
the loan proceeds.
(f) Payments of principal and interest must be made at least
quarterly and such payments shall be sufficient to amortize the
principal and interest payable pursuant to the loan on a substantially
level basis. Such payments must be made by payroll deduction.
(g) The Participant must obtain the consent of his spouse, if
any, to use of the Account balance as security for the loan. Spousal
consent shall be obtained no earlier than the beginning of the 90-day
period that ends on the date on which the loan is to be secured. The
consent must be in writing, must acknowledge the effect of the loan,
and must be witnessed by a Plan representative or notary public. Such
consent shall thereafter be binding with respect to the consenting
spouse and any subsequent spouse with respect to that loan. A new
consent shall be required if the Account balance is used for
renegotiation, extension, renewal, or other revision of the loan.
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(h) The term of a loan shall not extend beyond a Participant's
Normal Retirement Age, and each loan shall be due and payable
immediately upon the Participant's termination of employment. No
distribution shall be made to any Participant, or to a Beneficiary of
any such Participant, unless and until all unpaid loans, including
accrued interest thereon, have been satisfied. In the event of default,
including termination of the Employee's employment with the Employer or
upon failure to make a principal and interest payment as provided in
the loan agreement, foreclosure on the note and attachment of security
will occur as soon as a distributable event occurs under the Plan, and
the Nonforfeitable portion of the Participant's Account shall be offset
by the amount of any unpaid loan. If there is a risk of loss to the
Plan due to a delay in foreclosing on the Participant's security for
the loan, the Plan shall foreclose immediately unless doing so would
jeopardize the qualified status of the Plan under the Code. To the
extent permitted by the Code, the occurrence of a default shall itself
be treated as a distributable event with respect to a Participant's
Account, permitting the Trustee to offset the Nonforfeitable portion of
the Participant's Account by the outstanding balance of the loan (or so
much thereof as may be treated as distributed).
(i) The loan program under the Plan shall be administered by
the Plan Administrator in a uniform and nondiscriminatory manner. The
Plan Administrator shall establish procedures for applying for loans,
guidelines governing the basis on which loans shall be approved,
procedures for determining the appropriate interest rate, the types of
collateral that will be accepted as security, any limitations on the
types and amount of loans offered and the events that will constitute
default and actions to be taken to collect loans in default.
(j) No loans will be made to any shareholder-employee or
owner-employee. For purposes of this requirements, a
shareholder-employee means an employee or officer of an electing small
business (Subchapter S) corporation who owns (or is considered as
owning within the meaning of Section 318(a)(1) of the Code), on any day
during the taxable year of such corporation, more than 5% of the
outstanding stock of the corporation.
8.03 Withdrawals from Rollover Contributions Account, Transfer
Contributions Account, Voluntary Contributions Account and Qualified Voluntary
Contributions Account
A Participant may, pursuant to the rules and procedures
prescribed by the Plan Administrator, elect to withdraw the entire amount or any
portion of his Voluntary Contributions Account, Qualified Voluntary
Contributions Account, Rollover Contributions Account and/or Transfer
Contributions Account prior to his termination of employment with the Employer.
Except as otherwise expressly provided herein, such Participant shall, in all
other respects, continue to participate in the Plan as if no withdrawal had been
made. Notwithstanding the foregoing, amounts held in a Participant's Transfer
Contributions Account shall be subject to any distribution restrictions
applicable to such contributions.
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8.04 In-Service Withdrawal On or After Age 59-1/2
A Participant who has attained age 59-1/2 may, pursuant to the
rules and procedures prescribed by the Plan Administrator, elect to withdraw all
or any part of the Nonforfeitable portion of his Account prior to his
termination of employment with the Employer. Except as otherwise expressly
provided herein, such Participant shall, in all other respects, continue to
participate in the Plan as if no withdrawal had been made.
8.05 Hardship Withdrawals
A Participant may at any time file with the Plan Administrator
an appropriate written request for a hardship withdrawal of all or any part of
his Salary Deferral Contributions Account excluding any income allocated
thereto. Prior to June 1, 1999, amounts eligible for hardship withdrawals
included the Participant's Salary Deferral Contributions Account excluding any
income allocated thereto, as well as his vested Employer Matching Contributions
Account and his vested Discretionary Employer Contributions Account. The
approval or disapproval of such request shall be within the sole discretion of
the Plan Administrator. A Participant must first request and receive an
in-service withdrawal of any available amount credited to his Voluntary
Contributions Account, Qualified Voluntary Contributions Account, Rollover
Contributions Account and/or Transfer Contributions Account, and must also have
taken all distributions and loans otherwise available under all employee plans
maintained by the Employer in order to be permitted to make a hardship
withdrawal.
The Participant must certify that he has incurred a hardship
creating an immediate and substantial financial need and that the resources
necessary to satisfy that financial need are not reasonably available from other
sources available to the Participant. The amount of the hardship withdrawal
shall be limited to that amount determined by the Plan Administrator to be
required to meet the immediate financial need created by the hardship, including
anticipated Federal and state taxes and penalties resulting from the
distribution. The hardship withdrawal distribution shall be made in cash as soon
as practicable after the Participant submits the hardship request.
A Participant who makes a hardship withdrawal shall be
prohibited from making Salary Deferral Contributions and other employee
contributions to this Plan and any other plan maintained by the Employer (except
"welfare plans" as defined in Section 3(1) of ERISA) for the twelve (12)
consecutive months following the date of the request's approval. In addition,
the dollar limitation on Salary Deferral Contributions for such Participant
shall be reduced (but not below zero) in the Plan Year following the hardship
withdrawal by the amount of Salary Deferral Contributions made by the
Participant in the Plan Year during which the hardship withdrawal was made.
Standards for a hardship set forth in this Plan (or such other standards as may
be acceptable under Treasury Regulations issued pursuant to Section 401(k) of
the Code) shall be applied by the Plan Administrator on a uniform and
nondiscriminatory basis in determining the existence of financial hardship. To
be considered a financial hardship for purposes of this Section, the event
giving rise to the need for funds must relate to financial hardship resulting
from:
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(a) expenses previously incurred for medical care (described
in Code Section 213(d)) or expenses that are necessary to incur in
order to obtain medical care (as evidenced by a written estimate
thereof) for the Participant, the Participant's spouse or the
Participant's dependents (as defined in Code Section 152);
(b) the purchase (excluding mortgage payments) of a principal
residence for the Participant;
(c) payment for tuition, related educational fees, and room
and board expenses for the next twelve (12) months of post-secondary
education for the Participant or the Participant's spouse, children or
dependents (as defined in Code Section 152); or
(d) the need to prevent the eviction of the Participant from
his principal residence or foreclosure on the mortgage of the
Participant's principal residence.
A person shall be considered to be a dependent of the
Participant if the Participant certifies that he reasonably expects to be
entitled to claim that person as a dependent for Federal income tax purposes for
a calendar year coinciding with the Plan Year in which the certification of
hardship is made.
The Participant must obtain the consent of his spouse, if any,
for the hardship distribution of his Account. Spousal consent shall be obtained
no earlier than 90 days prior to the date of the hardship distribution. The
consent must be in writing, must acknowledge the effect of the hardship
distribution, and must be witnessed by a Plan representative or notary public.
Such consent thereafter shall be binding with respect to the consenting spouse
and any subsequent spouse.
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ARTICLE IX
EMPLOYER ADMINISTRATIVE PROVISIONS
9.01 Information to Plan Administrator
The Employer shall supply current information to the Plan
Administrator as to the name, date of birth, date of employment, annual
compensation, leaves of absence, Years of Service and date of termination of
employment of each Employee who is, or who will be eligible to become, a
Participant under the Plan, together with any other information that the Plan
Administrator considers necessary. The Employer's records as to the current
information the Employer furnishes to the Plan Administrator shall be conclusive
as to all persons.
9.02 No Liability
The Employer assumes no obligation or responsibility to any of
its Employees, Participants or Beneficiaries for any act of, or failure to act,
on the part of its Plan Administrator or the Trustee.
9.03 Indemnity of Committee
The Employer indemnifies and saves harmless the Plan
Administrator or the members of the Committee, it so established, and each of
them, from and against any and all loss (including reasonable attorney's fees
and costs of defense) resulting from liability to which the Plan Administrator
or the members of the Committee, may be subjected by reason of any act or
conduct (except willful misconduct or gross negligence) in their official
capacities in the administration of this Trust or Plan or both, including all
expenses reasonably incurred in their defense, in case the Employer fails to
provide such defense. The indemnification provisions of this Section 9.03 shall
not relieve any liability under ERISA for breach of a fiduciary duty to the
extent such indemnification is prohibited by ERISA. Furthermore, the Plan
Administrator or Committee members and the Employer may execute a letter
agreement further delineating the indemnification agreement of this Section
9.03, provided the letter agreement is consistent with and shall not violate
ERISA.
9.04 Indemnity of Trustee
To the extent permitted under ERISA, the Employer shall
indemnify and hold harmless the Trustee from and against all liabilities
(including reasonable attorney's fees and costs of defense) arising out of (a)
the acts or omissions to act with respect to the Plan by persons unrelated to
the Trustee, including the Employer, the employees or agents of the Employer,
the Plan Administrator, or any other fiduciary of the Plan ("Unrelated
Persons"); (b) the Trustee's action or inaction with respect to the Plan
resulting from reasonable reliance on the action or inaction of Unrelated
Persons, including directions to invest or otherwise deal with Plan assets; or
(c) any violation by any Unrelated Person of the provisions of ERISA or the
regulations
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thereunder. The foregoing indemnification does not apply to the extent that
liability arises because the Trustee has committed a breach of its duties by
reason of its gross negligence or willful misconduct. Expenses incurred by the
Trustee that are subject to indemnification under this Plan shall be paid by the
Employer upon the Trustee's request, provided that the Employer may delay
payment of any amount in dispute until such dispute is resolved.
9.05 Employer Direction of Investment
Subject to the provisions of Section 10.04, the Employer shall
have the right to direct the Trustee with respect to the investment and
re-investment of assets comprising the Trust Fund. In addition, the Employer
shall have the right to designate one or more Investment Managers who shall have
the power and authority to invest and otherwise manage some or all of the assets
of the Trust Fund, as designated by the Employer.
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ARTICLE X
PARTICIPANT ADMINISTRATIVE PROVISIONS
10.01 Personal Data to Plan Administrator
Each Participant and each Beneficiary of a deceased
Participant must furnish to the Plan Administrator such evidence, data or
information as the Plan Administrator considers necessary or desirable for the
purpose of administering the Plan. The provisions of this Plan are effective for
the benefit of each Participant upon the condition precedent that each
Participant will furnish promptly full, true and complete evidence, data and
information when requested by the Plan Administrator, provided the Plan
Administrator shall advise each Participant of the effect of his failure to
comply with its request.
10.02 Address for Notification
Each Participant and each Beneficiary of a deceased
Participant shall file with the Plan Administrator, from time to time, his post
office address and any change of post office address in writing or in such other
manner or form which is prescribed by the Plan Administrator. Any communication,
statement or notice addressed to a Participant or Beneficiary at his last post
office address filed with the Plan Administrator, or as shown on the records of
the Employer, shall bind the Participant or Beneficiary for all purposes of this
Plan.
10.03 Assignment or Alienation
Subject to Section 414(p) of the Code relating to qualified
domestic relations orders, neither a Participant nor a Beneficiary shall
anticipate, assign or alienate (either at law or in equity) any benefit provided
under the Plan, and the Trustee shall not recognize any such anticipation,
assignment or alienation. Furthermore, a benefit under the Plan is not subject
to attachment, garnishment, levy, execution or other legal or equitable process.
10.04 Participant Direction of Investment
Each Participant may direct the investment or re-investment of
the Participant's Account in the investments selected by the Plan Administrator
and/or the Trustee and permitted by law, in accordance with rules and procedures
for Participant investment direction established by the Plan Administrator and
the Trustee. Such rules may specify the percentage of a Participant's Account
that may be invested as designated, any portion of a Participant's Account that
will remain subject to investment direction by the Trustee (if any), whether a
Participant may designate investment categories separate from investment
categories selected by the Plan Administrator and Trustee, and rules governing
the timing, frequency, and manner of making investment elections. The Plan
Administrator and the Trustee reserve the right to change the investment options
available under the Plan and the rules governing investment designations from
time to time. The Trustee is under no duty to question any direction by a
Participant or his
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or her duly authorized agent with respect to investments. If a Participant fails
to direct the Trustee as to the investment of any portion of his or her Account,
that portion of his or her Account will be invested at the Trustee's discretion
until the Trustee receives effective investment directions. The Trustee is not
liable for any loss or breach resulting from a Participant's direction of the
investment of any part of his Account.
The Plan Administrator shall treat a loan made to a
Participant as a Participant direction of investment under this Section 10.04.
To the extent of the loan outstanding at any time, the borrowing Participant's
Account alone shares in any interest paid on the loan, and it alone bears any
expense or loss it incurs in connection with the loan. The Trustee may retain
any principal or interest paid on the borrowing Participant's loan in an
interest-bearing segregated Account on behalf of the borrowing Participant until
the Trustee deems it appropriate to add the amount paid to the Participant's
separate Account under the Plan.
10.05 Litigation Against the Trust
If any legal action filed against the Trustee, the Employer as
Plan Administrator, or the Committee, or against any member or members of the
Committee, by or on behalf of any Participant or Beneficiary, results adversely
to the Participant or to the Beneficiary, the Trustee shall reimburse itself,
the Employer or the Committee, or any member or members of the Committee, all
costs and fees expended by it or them by surcharging all costs and fees against
the sums payable under the Plan to the Participant or to the Beneficiary, but
only to the extent a court of competent jurisdiction specifically authorizes and
directs any such surcharges and only to the extent Section 401(a)(13) of the
Code does not prohibit any such surcharges.
10.06 Information Available
Any Participant in the Plan or any Beneficiary may examine
copies of the Plan description, latest annual report, any bargaining agreement,
this Plan and Trust, any contract or any other instrument under which the Plan
was established or is operated. The Employer will maintain all of the items
listed in this Section 10.06 in its offices, or in such other place or places as
it may designate from time to time in order to comply with the regulations
issued under ERISA, for examination during reasonable business hours. Upon the
written request of a Participant or Beneficiary the Employer shall furnish him
with a copy of any item listed in this Section 10.06. The Employer may make a
reasonable charge to the requesting person for the copy so furnished.
10.07 Claims Procedure
The Employer shall provide adequate notice in writing to any
Participant or to any Beneficiary ("Claimant") whose claim for benefits under
the Plan has been denied by the Plan Administrator. The Employer's notice to the
Claimant shall set forth:
(a) The specific reason for the denial;
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(b) Specific references to pertinent Plan provisions on which
the Plan Administrator based its denial;
(c) A description of any additional material and information
needed for the Claimant to perfect his claim and an explanation of why
the material or information is needed; and
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Plan Administrator within sixty
(60) days after receipt of the Employer's notice of denial of benefits.
The Employer's notice must further advise the Claimant that his failure
to appeal the action to the Plan Administrator in writing within the
sixty (60) day period will render the Plan Administrator's
determination final, binding and conclusive.
The initial determination of the Participant's claim shall be
made within ninety (90) days of the Claimant's claim for benefits, unless
special circumstances prevent the rendering of a decision within the ninety (90)
day limit. The Participant shall be notified of the need for the extended period
prior to the end of the initial ninety (90) day period and in no event shall the
Plan Administrator render a decision respecting a denial for a claim for
benefits later than one hundred eighty (180) days after its receipt for review.
To the extent that a written response has not been received by the Claimant, the
claim shall be deemed denied.
If the Claimant should appeal a denial of a claim to the Plan
Administrator, the Claimant or his duly authorized representative, may submit,
in writing, whatever issues and comments he or his duly authorized
representative feel are pertinent. The Claimant or his duly authorized
representative may review pertinent Plan documents. The Plan Administrator shall
re-examine all facts related to the appeal and make a final determination as to
whether the denial of benefits is justified under the circumstances. The Plan
Administrator shall advise the Claimant of its decision within sixty (60) days
of the Claimant's written request for review, unless special circumstances (such
as a hearing) prevent the rendering of a decision within the sixty (60) day
limit. The Participant shall be notified of the need for the extended period
prior to the end of the initial sixty (60) day period and in no event shall the
Plan Administrator render a decision respecting a denial for a claim for
benefits later than one hundred twenty (120) days after its receipt of a request
for appeal.
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ARTICLE XI
ADMINISTRATION OF THE PLAN
11.01 Allocation of Responsibility Among Fiduciaries for Plan and Trust
Administration
The fiduciaries shall have only those powers, duties,
responsibilities and obligations as are specifically given them under this Plan
and Trust. The Employer shall have the sole responsibility for making the
contributions provided for under Article III, and shall have the sole authority
to appoint and remove the Trustee and the Plan Administrator, and to amend or
terminate, in whole or in part, this Plan or Trust. The Employer shall have the
final responsibility for administration of the Plan, which responsibility is
specifically described in this Plan and Trust, and shall be the "Plan
Administrator" and the named fiduciary. The Plan Administrator shall have the
specific delegated powers and duties described in the further provisions of this
Article X and such further powers and duties as hereinafter may be delegated to
it by the Employer. The Trustee shall have the sole responsibility for the
administration of the Trust and the management of the assets held under the
Trust, all as specifically provided in the Trust. Each fiduciary warrants that
any directions given, information furnished, or action taken by it shall be in
accordance with the provisions of this Plan and Trust, authorizing or providing
for such direction, information or action. Furthermore, each fiduciary may rely
upon any such direction, information or action of another fiduciary as being
proper under this Plan and Trust, and is not required under this Plan or the
Trust to inquire into the propriety of any such direction, information or
action. It is intended under this Plan and Trust that each fiduciary shall be
responsible for the proper exercise of its own powers, duties, responsibilities
and obligations under this Plan and Trust and shall not be responsible for any
act or failure to act of another fiduciary. No fiduciary guarantees the Trust
Fund in any manner against investment loss or depreciation in asset value.
11.02 Appointment of Committee
A Committee consisting of one or more persons may be appointed
by and serve at the pleasure of the Board to assist in the administration of the
Plan. All usual and reasonable expenses of the Committee may be paid in whole or
in part by the Employer, and any expenses not paid by the Employer shall be paid
by the Trustee out of the principal or income of the Trust Fund. Any members of
the Committee who are Employees shall not receive compensation with respect to
their services for the Committee.
11.03 Committee Procedures
The Committee may act at a meeting or in writing without a
meeting. The Committee shall elect one of its members as chairperson, appoint a
secretary, who may or may not be a Committee member, and advise the Trustee of
such actions in writing. The secretary shall keep a record of all meetings and
forward all necessary communications to the Employer,
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or the Trustee. The Committee may adopt such by-laws and regulations as it deems
desirable for the conduct of its affairs. All decisions of the Committee shall
be made by the vote of the majority, including actions in writing taken without
a meeting. A dissenting Committee member who, within a reasonable time after he
has knowledge of any action or failure to act by the majority, registers his
dissent in writing delivered to the other Committee members, the Employer and
the Trustee, shall not be responsible for any such action or failure to act.
11.04 Records and Reports
The Employer (or the Committee if so designated by the
Employer) shall exercise such authority and responsibility as it deems
appropriate in order to comply with ERISA and governmental regulations issued
thereunder relating to records of Participant's Service, Account balances and
the percentage of such Account balances that are Nonforfeitable under the Plan;
notifications to Participants; annual registration with the Internal Revenue
Service; and annual reports to the Department of Labor.
11.05 Other Committee Powers and Duties
The Committee shall have the following powers and duties:
(a) To determine the rights of eligibility of an Employee to
participate in the Plan, the value of a Participant's Account and the
Nonforfeitable percentage of each Participant's Account;
(b) To adopt rules of procedure and regulations necessary for
the proper and efficient administration of the Plan, provided the rules
are not inconsistent with the terms of this Plan and Trust;
(c) To construe and enforce the terms of the Plan and the
rules and regulations it adopts, including the discretionary authority
to interpret the Plan documents, documents related to the Plan's
operation, and issues of fact;
(d) To direct the Trustee with respect to the crediting and
distribution of the Trust;
(e) To review and render decisions respecting a claim for (or
denial of a claim for) a benefit under the Plan;
(f) To furnish the Employer with information that the Employer
may require for tax or other purposes.
(g) To engage the services of agents whom it may deem
advisable to assist it with the performance of its duties;
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(h) To engage the services of an Investment Manager or
Managers (as defined in ERISA Section 3(38)), each of whom shall have
full power and authority to manage, acquire or dispose (or direct the
Trustee with respect to acquisition or disposition) of any Plan asset
under its control; and
(i) To establish a nondiscriminatory policy which the Trustee
shall observe in making loans to Participants.
11.06 Rules and Decisions
The Committee may adopt such rules as it deems necessary,
desirable or appropriate. All rules and decisions of the Committee shall be
uniformly and consistently applied to all Participants in similar circumstances.
When making a determination or calculation, the Committee shall be entitled to
rely upon information furnished by a Participant or Beneficiary, the Employer,
the legal counsel of the Employer, or the Trustee.
11.07 Application and Forms for Benefits
The Committee may require a Participant or Beneficiary to
complete and file with the Committee an application for a benefit and all other
forms approved by the Committee, and to furnish all pertinent information
requested by the Committee. The Committee may rely upon all such information so
furnished it, including the Participant's or Beneficiary's current mailing
address.
11.08 Authorization of Benefit Payments
The Committee shall issue directions to the Trustee concerning
all benefits that are to be paid from the Trust Fund pursuant to the provisions
of the Plan, and warrants that all such directions are in accordance with this
Plan.
11.09 Funding Policy
The Committee shall review, not less often than annually, all
pertinent information and Plan data in order to establish the funding policy of
the Plan and to determine the appropriate methods of carrying out the Plan's
objectives. The Committee shall communicate periodically, as it deems
appropriate, to the Trustee and to any Plan Investment Manager, Participant
investment designations and the Plan's short-term and long-term financial needs
so that investment policy can be coordinated with Plan financial requirements.
11.10 Fiduciary Duties
In performing their duties, all fiduciaries with respect to
the Plan shall act solely in the interest of the Participants and their
Beneficiaries, and:
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(a) For the exclusive purpose of providing benefits to the
Participant and their Beneficiaries;
(b) With the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims;
(c) To the extent a fiduciary possesses and exercises
investment responsibilities, by diversifying the investments of the
Trust Fund so as to minimize the risk of large losses, unless under the
circumstances it is clearly prudent not to do so; and
(d) In accordance with the documents and instruments governing
the Plan insofar as such documents and instruments are consistent with
the provisions of Title I of ERISA.
11.11 Allocation or Delegation of Duties and Responsibilities
In furtherance of their duties and responsibilities under the
Plan, the Committee and the Board may, subject always to the requirements of
Section 11.10,
(a) Employ agents to carry out nonfiduciary responsibilities;
(b) Employ agents to carry out fiduciary responsibilities
(other than trustee responsibilities as defined in Section 405(c)(3) of
ERISA);
(c) Consult with counsel, who may be of counsel to the
Employer; and
(d) Provide for the allocation of fiduciary responsibilities
(other than trustee responsibilities as defined in Section 405(c)(3) of
ERISA) between the members of the Board, in the case of the Board, and
among the members of the Committee, in the case of the Committee.
11.12 Separate Accounting
The amounts in a Participant's Salary Deferral Contributions
Account shall at all times be separately accounted for from amounts in a
Participant's Employer Matching Contributions Account, Discretionary Employer
Contributions Account and subaccounts attributable to Voluntary Employer
Contributions, Qualified Voluntary Contributions, Rollover Contributions and
Transfer Contributions by allocating investment gains and losses on a reasonable
pro rata basis, and by adjusting the subaccounts of a Participant's Account for
withdrawals, distributions and contributions. Gains, losses, withdrawals,
distributions, forfeitures and other credits or charges shall be separately
allocated between such subaccounts on a reasonable and consistent basis.
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11.13 Value of Participant's Account
The value of each Participant's Account shall consist of that
proportion of the net worth (at fair market value) of the Employer's Trust Fund
which the net credit balance in his Account bears to the total net credit
balance in the Accounts of all Participants. For purposes of a distribution
under the Plan, the value of a Participant's Account shall be its value as of
the Valuation Date immediately preceding the date of the distribution, increased
or decreased, as the case may be, for contributions or withdrawals and income or
loss allocations made since the last Valuation Date.
11.14 Account Adjustments
The Accounts of Participants, former Participants and
Beneficiaries shall be adjusted each Plan Year in accordance with the following:
(a) Income of the Trust Fund. Each Valuation Date, the Trustee
shall value the Trust Fund at its then market value to determine the
amount of Income of the Trust Fund. The Income of the Trust Fund since
the preceding Valuation Date shall be allocated to the Accounts of the
Participants in proportion to the balances in such Accounts on the
preceding Valuation Date, but after first reducing each such Account
balance by any distributions from such Account since the preceding
Valuation Date. The Income of the Trust Fund attributable to a
particular investment fund shall be credited to such investment fund.
(b) Contributions. As of each Valuation Date during the Plan
Year, the Trustee shall allocate to each respective Participant's
Account the contributions to the Plan made since the preceding
Valuation Date.
(c) Restorations. Contributions shall be used to restore
Accounts whenever the Accounts must be reinstated under the Plan.
11.15 Valuation of Trust Fund
A valuation of the Trust Fund shall be made as of each
Valuation Date and on any other date during the Plan Year that the Plan
Administrator deems a valuation to be advisable. Any such interim valuation
shall be exercised on a uniform and nondiscriminatory basis. For the purposes of
each valuation, the assets of each investment fund shall be valued at the
respective current market values, and the amount of any obligations for which
the investment fund may be liable, as shown on the books of the Trustee, shall
be deducted from the total value of the assets. For the purposes of maintenance
of books of account in respect of properties comprising the Trust Fund, and of
making any such valuation, the Trustee shall account for the transactions of the
Trust Fund on a modified cash basis.
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11.16 Individual Statement
The Plan Administrator will deliver an annual statement (or
more frequent, in the discretion of the Plan Administrator) to each Participant
(and to each Beneficiary) reflecting the condition of his Account in the Trust
as of that date and such other information ERISA requires be furnished the
Participant or Beneficiary. No Participant, except a member of the Committee,
shall have the right to inspect the records reflecting the Account of any other
Participant.
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ARTICLE XII
TOP-HEAVY RULES
12.01 Minimum Employer Contribution
If this Plan is Top-Heavy in any Plan Year, the Plan
guarantees a minimum contribution (subject to the provisions of this Article
XII) of three percent (3%) of Compensation for each Non-Key Employee who is a
Participant employed by the Employer on the Accounting Date of the Plan Year
(without regard to Hours of Service completed during the Plan Year). The Plan
satisfies the guaranteed minimum contribution for the Non-Key Employee if the
Non-Key Employee's contribution rate is at least equal to the minimum
contribution. For purposes of this paragraph, a Non-Key Employee Participant
includes any Employee otherwise eligible to participate in the Plan but who is
not a Participant because his Compensation does not exceed a specified level.
If the contribution rate for the Key Employee with the highest
contribution rate is less than three percent (3%), the guaranteed minimum
contribution for Non-Key Employees shall equal the highest contribution rate
received by a Key Employee. The contribution rate is the sum of Employer
contributions (not including Employer contributions to Social Security) and
forfeitures allocated to the Participant's Account for the Plan Year divided by
his Compensation for the Plan Year. For purposes of determining the minimum
contribution for a Plan Year, the Plan Administrator shall consider
contributions made to any plan pursuant to a salary reduction agreement or
similar arrangement as Employer contributions. To determine the contribution
rate, the Plan Administrator shall consider all qualified Top-Heavy defined
contribution plans maintained by the Employer as a single plan.
12.02 Top-Heavy Vesting
Each Participant who has completed an Hour of Service after
the Plan becomes Top-Heavy and while the Plan is Top-Heavy and who has completed
the number of Years of Service for vesting specified in the following table
shall be vested in his Employer Matching Contribution Account and Discretionary
Employer Contribution Account under this Plan at least as rapidly as is provided
in the following schedule:
<TABLE>
<CAPTION>
Years of Service Nonforfeitable Percentage
---------------- -------------------------
<S> <C>
Less than 2 years 0%
2 but less than 3 years 40%
3 but less than 4 years 60%
4 but less than 5 years 80%
5 years or more 100%
</TABLE>
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<PAGE> 71
The preceding schedule shall apply only to the extent that it
provides a Participant with a greater Nonforfeitable percentage than the vesting
schedule under the Plan. If an Account becomes vested by reason of the
application of the preceding schedule, it may not thereafter be forfeited for
any reason. If the Plan subsequently ceases to be Top-Heavy, a Participant may
choose to have the preceding schedule continue to apply, provided that such
Participant had at least three (3) years of service (as defined in Treasury
Regulation Section 1.411(a)-8T(b)(3)) as of the close of the last year that the
Plan was Top-Heavy. For all other Participants, the Nonforfeitable percentage
provided in the preceding schedule prior to the date the Plan ceases to be
Top-Heavy shall not be reduced.
12.03 Additional Contribution
If the contribution rate for the Plan Year with respect to a
Non-Key Employee described in Section 12.01 is less than the minimum
contribution, the Employer will increase its contribution for such Employee to
the extent necessary so his contribution rate for the Plan Year will equal the
guaranteed minimum contribution. The Plan Administrator shall allocate the
additional contribution to the Account of a Non-Key Employee for whom the
Employer makes the contribution.
12.04 Determination of Top-Heavy Status
The Plan is "Top-Heavy" for a Plan Year if the Top-Heavy ratio
as of the Determination Date exceeds sixty percent (60%). The Top-Heavy ratio is
a fraction, the numerator of which is the sum of the present value of Accounts
of all Key Employees as of the Determination Date, the contributions due as of
the Determination Date, and distributions made within the five (5) Plan Year
period ending on the Determination Date, and the denominator of which is a
similar sum determined for all Employees. The Plan Administrator shall calculate
the Top-Heavy ratio without regard to the Account of any Non-Key Employee who
was formerly a Key Employee. The Plan Administrator shall calculate the
Top-Heavy ratio by disregarding the Account portion (including distributions, if
any, of the Account) of an individual who has not received credit for at least
one (1) Hour of Service with the Employer during the five (5) Plan Year period
ending on the Determination Date. The Plan Administrator shall calculate the
Top-Heavy ratio, including the extent to which it must take into account
distributions, rollovers and transfers, in accordance with Section 416 of the
Code and the regulations thereunder.
If the Employer maintains other qualified plans (including a
simplified employee pension plan) this Plan is Top-Heavy only if it is part of
the Required Aggregation Group, and the Top-Heavy ratio for both the Required
Aggregation Group and the Permissive Aggregation Group exceeds sixty percent
(60%). The Plan Administrator will calculate the Top-Heavy ratio in the same
manner as required by the first paragraph of this Section 12.04, taking into
account all plans within the Aggregation Group. To the extent the Plan
Administrator must take into account distributions to a Participant, the Plan
Administrator shall include distributions from a terminated plan that would have
been part of the Required Aggregation Group if it were in existence on the
Determination Date. The Plan Administrator shall calculate the present value of
accrued benefits and the other amounts the Plan Administrator must take into
account, under
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<PAGE> 72
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans, Section 416 of the Code and
the regulations thereunder. If an aggregated plan does not have a valuation date
coinciding with the Determination Date, the Plan Administrator shall value the
accrued benefits or Accounts in the aggregated plan as of the most recent
valuation date falling within the twelve-month period ending on the
Determination Date. The Plan Administrator shall calculate the Top-Heavy ratio
with reference to the Determination Dates that fall within the same calendar
year.
The accrued benefit of a Participant other than a Key Employee
shall be determined under (i) the method, if any, that uniformly applies for
accrual purposes under all defined benefit plans maintained by the Employer, or
(ii) if there is no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional rule of
Section 411(b)(1)(C) of the Code.
12.05 Limitation of Allocations
If, during any Limitation Year, this Plan is Top-Heavy, the
Plan Administrator shall apply the limitations of Article IV to a Participant by
substituting "100%" for "125%" each place it appears in Section 4.03. This
Section 12.05 shall not apply if:
(a) The contribution rate for a Non-Key Employee who
participates only in the defined contribution plan(s) would satisfy
Section 12.01 if the Plan Administrator substituted four percent (4%)
for three percent (3%);
(b) A Non-Key Employee who participates in any Top-Heavy
defined benefit plan(s) receives an extra minimum contribution or
benefit that satisfies Section 416(h)(2) of the Code; and
(c) The Top-Heavy ratio does not exceed ninety percent (90%).
12.06 Definitions
For purposes of applying the provisions of this Article XII:
(a) "Key Employee" shall mean, as of any Determination Date,
any Employee or former Employee (or Beneficiary of such Employee) who,
at any time during the Plan Year (which includes the Determination
Date) or during the preceding four Plan Years, is (1) an officer of the
Employer having annual Compensation in excess of 50% of the amount in
effect under Section 415(b)(1)(A) of the Code for any such Plan Year,
(2) one of the ten Employees owning the largest interests in the
Employer and earning more than the dollar limitation in effect under
Section 415(c)(1)(A) of the Code for such Plan Year, (3) a more than
five percent (5%) owner of the Employer, or (4) a more than one percent
(1%) owner of the Employer who has annual Compensation of more than
$150,000. The constructive ownership rules of Section 318 of the Code
(or the principles of that section, in the case of an unincorporated
Employer) will apply to determine ownership in the Employer.
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<PAGE> 73
The Plan Administrator will make the determination of who is a Key Employee in
accordance with Section 416(i)(1) of the Code and the regulations under that
Code Section.
(b) "Non-Key Employee" is an Employee who does not meet the
definition of Key Employee.
(c) "Required Aggregation Group" means
(i) Each qualified plan of the Employer in which at
least one (1) Key Employee participates at any time during the
five (5) Plan Year period ending on the Determination Date;
and
(ii) Any other qualified plan of the Employer that
enables a plan described in (1) to meet the requirements of
Section 401(a)(4) or Section 410 of the Code.
The Required Aggregation Group includes any plan of
the Employer which was maintained within the last five years ending on
the Determination Date on which a top heaviness determination is being
made if such plan would otherwise be part of the Required Aggregation
Group for the Plan Year but for the fact it has been terminated.
(d) "Permissive Aggregation Group" is the Required Aggregation
Group plus any other qualified plans maintained by the Employer, but
only if such group would satisfy in the aggregate the requirements of
Section 401(a)(4) and Section 410 of the Code. The Plan Administrator
shall determine which plans to take into account in determining the
Permissive Aggregation Group.
(e) "Employer" means all the members of a controlled group of
corporations (as defined in Section 414(b) of the Code), of a commonly
controlled group of trades or businesses (whether or not incorporated)
(as defined in Section 414(c) of the Code), or an affiliated service
group (as defined in Section 414(m) of the Code), of which the Employer
is a part. However, the Plan Administrator shall not aggregate
ownership interests in more than one member of a related group to
determine whether an individual is a Key Employee because of his
ownership interest in the Employer.
(g) "Determination Date" for any Plan Year is the Accounting
Date of the preceding Plan Year or, in the case of the first Plan Year of the
Plan, the Accounting Date of that Plan Year.
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ARTICLE XIII
MISCELLANEOUS
13.01 Evidence
Anyone required to give evidence under the terms of the Plan
may do so by certificate, affidavit, document or other information that the
person to act in reliance may consider pertinent, reliable and genuine, and to
have been signed, made or presented by the proper party or parties. Both the
Plan Administrator and the Trustee shall be fully protected in acting and
relying upon any evidence described under the immediately preceding sentence.
13.02 No Responsibility for Employer Action
Neither the Trustee nor the Plan Administrator shall have any
obligation or responsibility with respect to any action required by the Plan to
be taken by the Employer, any Participant or Eligible Employee, nor for the
failure of any of the above persons to act or make any payment or contribution,
or to otherwise provide any benefit contemplated under this Plan, nor shall the
Trustee or the Plan Administrator be required to collect any contribution
required under the Plan, or determine the correctness of the amount of any
Employer contribution. Neither the Trustee nor the Plan Administrator need
inquire into or be responsible for any action or failure to act on the part of
the others. Any action required of a corporate Employer shall be by its Board or
its designate.
13.03 Fiduciaries Not Insurers
The Trustee, the Committee, the Plan Administrator and the
Employer in no way guarantee the Trust Fund from loss or depreciation. The
Employer does not guarantee the payment of any money that may be or becomes due
to any person from the Trust Fund. The liability of the Plan Administrator and
the Trustee to make any payment from the Trust Fund at any time and all times is
limited to the then available assets of the Trust.
13.04 Waiver of Notice
Any person entitled to notice under the Plan may waive the
notice, unless the Code or Treasury Regulations require the notice, or ERISA
specifically or impliedly prohibits such a waiver.
13.05 Successors
The Plan shall be binding upon all persons entitled to
benefits under the Plan, their respective heirs and legal representatives, upon
the Employer, its successors and assigns, and upon the Trustee, the Committee,
the Plan Administrator and their successors.
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13.06 Word Usage
Words used in the masculine shall apply to the feminine or
neuter where applicable, and wherever the context of the Plan dictates, the
plural shall be read as singular and the singular as the plural.
13.07 Headings
The headings are for reference only. In the event of a
conflict between a heading and the content of a section, the content of the
section shall control.
13.08 State Law
The laws of the State of Ohio shall determine all questions
arising with respect to the provision of this Agreement except to the extent
that an applicable Federal statute supersedes Ohio law.
13.09 Employment Not Guaranteed
Except as expressly provided by the Plan, the Trust, ERISA or
by a separate agreement, nothing contained in this Plan, and nothing with
respect to the establishment of the Trust, any modification or amendment to the
Plan or Trust, the creation of any Account, or the payment of any benefit, shall
give any Employee, Participant or Beneficiary any right to continue employment,
or any legal or equitable right against the Employer, or an Employee of the
Employer, the Trustee or its agents or employees, or the Plan Administrator.
Nothing in the Plan shall be deemed or construed to impair or affect in any
manner the right of the Employer, in its discretion, to hire Employees and, with
or without cause, to discharge or terminate the service of Employees.
13.10 Payment of Plan Expenses
All reasonable and necessary expenses incident to the
administration, termination or protection of the Plan and Trust, including, but
not limited to, accounting, investment manager and Trustee fees, may be paid
from the Trust Fund to the extent permitted by ERISA. Such expenses of the Plan
shall be paid from the Trust to the extent not paid by the Employer.
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ARTICLE XIV
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
14.01 Exclusive Benefit
Except as provided under Article III, the Employer shall have
no beneficial interest in any asset of the Trust and no part of any asset in the
Trust shall ever revert to or be repaid to the Employer, either directly or
indirectly; nor prior to the satisfaction of all liabilities with respect to the
Participants and their Beneficiaries under the Plan, shall any part of the
corpus or income of the Trust Fund, or any asset of the Trust, be (at any time)
used for, or diverted to, purposes other than the exclusive benefit of the
Participants or their Beneficiaries.
14.02 Amendment by Employer
The Employer shall have the right at any time and from time to
time:
(a) To amend this agreement in any manner it deems necessary
or advisable in order to qualify (or maintain qualification of) this
Plan and the Trust created under it under the appropriate provisions of
the Code; and
(b) To amend this agreement in any other manner.
However, no amendment shall authorize or permit any part of
the Trust Fund (other than the part required to pay taxes and administration
expenses) to be used for or diverted to purposes other than for the exclusive
benefit of the Participants or their Beneficiaries or estates. No amendment
shall cause or permit any portion of the Trust Fund to revert to or become a
property of the Employer; and the Employer shall not make any amendment that
affects the rights, duties or responsibilities of the Trustee, the Plan
Administrator or the Committee without the written consent of the affected
Trustee, the Plan Administrator or the affected member of the Committee.
Furthermore, no amendment shall decrease a Participant's Account balance or
accrued benefit or reduce or eliminate any benefits protected under
Section 411(d)(6) of the Code, including an optional form of distribution, with
respect to a Participant with an Account balance or accrued benefit at the date
of the amendment, except to the extent permitted under Section 412(c)(8) of the
Code.
14.03 Amendment to Vesting Provisions
Through the Employer reserves the right to amend the vesting
provisions at any time, the Plan Administrator shall not apply an amended
vesting schedule to reduce the Nonforfeitable percentage of any Participant's
Account derived from Employer contributions (determined as of the later of the
date the Employer adopts the amendment, or the date the amendment becomes
effective) to a percentage less than the Nonforfeitable percentage computed
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under the Plan without regard to the amendment. An amended vesting schedule will
apply to a Participant only if the Participant receives credit for at least one
Hour of Service after the new schedule becomes effective.
If the Employer makes a permissible amendment to the vesting
provisions, each Participant having at least three (3) Years of Service with the
Employer may elect to have the Nonforfeitable percentage of his Account balance
computed under the Plan without regard to the amendment. The Participant must
file his election with the Employer within sixty (60) days of the latest of (a)
the Employer's adoption of the amendment; (b) the effective date of the
amendment; or (c) his receipt of a copy of the amendment. The Employer, as soon
as practicable, shall forward a true copy of any amendment to the vesting
schedule to each affected Participant, together with an explanation of the
effect of the amendment, the appropriate form upon which the Participant may
make an election to remain under the vesting schedule. The election described in
this Section 14.03 does not apply to a Participant if the amended vesting
schedule provides for vesting at least as rapid at all times as a vesting
schedule in effect prior to the amendment. For purposes of this Section 14.03,
an amendment to the vesting schedule includes any amendment that directly or
indirectly affects the computation of the Nonforfeitable percentage of an
Employee's rights to his Employer derived Account.
14.04 Discontinuance
The Employer shall have the right, at any time, to suspend or
discontinue its contributions under the Plan, and to terminate, at any time,
this Plan and the Trust created under the Plan.
14.05 Full Vesting on Plan Termination
Notwithstanding any other provision of this Plan to the
contrary, upon either full or partial termination of the Plan, or, if
applicable, upon the date of complete discontinuance of contributions to the
Plan, an affected Participant's right to his Account shall be one hundred
percent (100%) Nonforfeitable.
14.06 Merger, Direct Transfer and Elective Transfer
The Trustee shall not consent to, or be a party to, any merger
or consolidation with another plan, or to a transfer of assets or liabilities to
another plan, unless immediately after the merger, consolidation or transfer,
the surviving plan provides each Participant a benefit equal to or greater than
the benefit each Participant would have received had the Plan terminated
immediately before the merger or consolidation or transfer.
If permitted by the Employer in its discretion, the Trustee
may accept a direct transfer of plan assets on behalf of an Employee prior to
the date the Employee satisfies the Plan's eligibility condition(s). If the
Trustee accepts such a direct transfer of plan assets, the Plan Administrator
and Trustee shall treat the Employee as a Participant for all purposes of the
Plan except the Employee shall not share in Employer contributions or
Participant forfeitures
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under the Plan until he actually becomes a Participant in the Plan. The Trustee
shall hold, administer and distribute the transferred assets as a part of the
general Trust Fund. Unless a transfer of assets to this Plan is an elective
transfer, the Plan will preserve all Code Section 411(d)(6) protected benefits
with respect to those transferred assets, in the manner described in Section
14.02.
If the Plan receives a direct transfer (by merger or
otherwise) of elective contributions (or amounts treated as elective
contributions) under a Plan with a Section 401(k) arrangement of the Code, the
distribution restrictions of Section Section 401(k)(2) and (10) of the Code
continue to apply to those transferred elective contributions.
14.07 Termination of the Plan
Upon termination of the Plan, the distribution provisions of
Article VI and VII shall remain operative, except that:
(a) If the present value of the Nonforfeitable portion of the
Participant's Account does not exceed $5,000 (prior to 1998, $3,500),
the Plan Administrator will direct the Trustee to distribute the
Nonforfeitable portion of the Participant's Account to him in lump sum
as soon as administratively practicable after the Plan terminates; and
(b) If the present value of the Nonforfeitable portion of the
Participant's Account exceeds $5,000 (prior to 1998, $3,500), the
Participant or the Beneficiary, in addition to the distribution events
permitted under Articles VI and VII, may elect to have the Trustee
commence distribution of the Nonforfeitable portion of the
Participant's Account as soon as administratively practicable after the
Plan terminates.
The Trust shall continue until the Trustee, after written
direction from the Plan Administrator, has distributed all of the benefits under
the Plan. To liquidate the Trust, the Plan Administrator may purchase a deferred
annuity contract for each Participant which protects the Participant's
distribution rights under the Plan, if the Nonforfeitable portion of the
Participant's Account exceeds $5,000 and the Participant does not elect an
immediate distribution pursuant to this Section 14.07.
The Employer has executed this Plan on the date set forth
below.
Employer:
THE BISYS GROUP, INC.
Dated: July 15, 1999 By: /s/ Mark J. Rybarczyk
---------------------
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EXHIBIT 10.17
CREDIT AGREEMENT
DATED AS OF JUNE 30, 1999
AMONG
THE BISYS GROUP, INC.,
AS BORROWER
THE LENDERS PARTY HERETO
THE CHASE MANHATTAN BANK,
THE FIRST NATIONAL BANK OF CHICAGO,
FIRST UNION NATIONAL BANK,
AND
FLEET BANK, NATIONAL ASSOCIATION,
AS CO-AGENTS
AND
THE BANK OF NEW YORK,
AS ADMINISTRATIVE AGENT
---------------------------
BNY CAPITAL MARKETS, INC.
AS LEAD ARRANGER AND BOOK MANAGER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1. DEFINITIONS.................................................................................1
Section 1.1 Defined Terms..........................................................................1
Section 1.2 Classification of Loans and Borrowings................................................20
Section 1.3 Terms Generally.......................................................................20
Section 1.4 Accounting Terms; GAAP................................................................21
ARTICLE 2. THE CREDITS................................................................................21
Section 2.1 Commitments...........................................................................21
Section 2.2 Loans and Borrowings..................................................................22
Section 2.3 Requests for Revolving Borrowings.....................................................23
Section 2.4 Competitive Bid Loans.................................................................23
Section 2.5 Swingline Loans.......................................................................26
Section 2.6 Funding of Borrowings.................................................................28
Section 2.7 Termination and Reduction of Commitments..............................................28
Section 2.8 Repayment of Loans; Evidence of Debt..................................................29
Section 2.9 Prepayment of Loans...................................................................30
Section 2.10 Letters of Credit....................................................................31
Section 2.11 Payments Generally; Pro Rata Treatment; Sharing of Setoffs...........................36
ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC......................................................38
Section 3.1 Interest..............................................................................38
Section 3.2 Interest Elections....................................................................39
Section 3.3 Fees..................................................................................40
Section 3.4 Alternate Rate of Interest............................................................41
Section 3.5 Increased Costs; Illegality...........................................................42
Section 3.6 Break Funding Payments................................................................44
Section 3.7 Taxes.................................................................................45
Section 3.8 Mitigation Obligations; Replacement of Lenders........................................46
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.............................................................47
Section 4.1 Organization; Powers..................................................................47
Section 4.2 Authorization; Enforceability.........................................................47
Section 4.3 Governmental Approvals; No Conflicts..................................................48
Section 4.4 Financial Condition; No Material Adverse Change.......................................48
Section 4.5 Properties............................................................................48
Section 4.6 Litigation and Environmental Matters..................................................49
Section 4.7 Compliance with Laws and Agreements...................................................49
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 4.8 Investment and Holding Company Status.................................................49
Section 4.9 Taxes.................................................................................50
Section 4.10 ERISA................................................................................50
Section 4.11 Disclosure...........................................................................50
Section 4.12 Subsidiaries.........................................................................51
Section 4.13 Insurance............................................................................51
Section 4.14 Labor Matters........................................................................51
Section 4.15 Solvency.............................................................................51
Section 4.16 Federal Reserve Regulations..........................................................52
Section 4.17 Year 2000............................................................................52
ARTICLE 5. CONDITIONS.................................................................................52
Section 5.1 Effective Date........................................................................52
Section 5.2 Conditions to Extensions of Credit in Connection with
Acquisitions Permitted under Section 7.4(l) of this Credit Agreement..................55
Section 5.3 Each Credit Event.....................................................................56
ARTICLE 6. AFFIRMATIVE COVENANTS......................................................................56
Section 6.1 Financial Statements and Other Information............................................56
Section 6.2 Notices of Material Events............................................................58
Section 6.3 Existence; Conduct of Business........................................................58
Section 6.4 Payment of Obligations................................................................58
Section 6.5 Maintenance of Properties.............................................................59
Section 6.6 Books and Records; Inspection Rights..................................................59
Section 6.7 Compliance with Laws..................................................................59
Section 6.8 Use of Proceeds.......................................................................59
Section 6.9 Insurance.............................................................................59
Section 6.10 Additional Subsidiaries..............................................................60
Section 6.11 Environmental Compliance.............................................................60
Section 6.12 Subsidiary Guarantors................................................................60
Section 6.13 Year 2000 Compliance.................................................................61
ARTICLE 7. NEGATIVE COVENANTS.........................................................................61
Section 7.1 Indebtedness..........................................................................61
Section 7.2 Liens.................................................................................64
Section 7.3 Fundamental Changes...................................................................65
Section 7.4 Investments, Loans, Advances, Guarantees and Acquisitions.............................66
Section 7.5 Asset Sales...........................................................................68
Section 7.6 Sale and Lease-Back Transactions......................................................69
Section 7.7 Hedging Agreements....................................................................69
Section 7.8 Restricted Payments...................................................................70
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 7.9 Transactions with Affiliates..........................................................70
Section 7.10 Restrictive Agreements...............................................................71
Section 7.11 Amendment of Material Documents......................................................71
Section 7.12 Fixed Charge Coverage Ratio..........................................................71
Section 7.13 Leverage Ratio.......................................................................71
Section 7.14 Consolidated Net Worth...............................................................71
Section 7.15 Ratio of Funded Indebtedness to Capitalization.......................................72
ARTICLE 8. EVENTS OF DEFAULT..........................................................................72
ARTICLE 9. THE ADMINISTRATIVE AGENT...................................................................75
ARTICLE 10. MISCELLANEOUS.............................................................................77
Section 10.1 Notices..............................................................................77
Section 10.2 Waivers; Amendments..................................................................78
Section 10.3 Expenses; Indemnity; Damage Waiver...................................................79
Section 10.4 Successors and Assigns...............................................................80
Section 10.5 Survival.............................................................................83
Section 10.6 Counterparts; Integration; Effectiveness.............................................83
Section 10.7 Severability.........................................................................84
Section 10.8 Right of Setoff......................................................................84
Section 10.9 Governing Law; Jurisdiction; Consent to Service of Process...........................84
Section 10.10 WAIVER OF JURY TRIAL................................................................85
Section 10.11 Headings............................................................................85
Section 10.12 Interest Rate Limitation............................................................85
Section 10.13 Treatment of Certain Information....................................................86
</TABLE>
iii
<PAGE> 5
SCHEDULES:
Schedule 1.1 Existing Letters of Credit
Schedule 2.1 Commitments; Addresses for Notices
Schedule 4.6 Disclosed Matters
Schedule 4.12 Subsidiaries
Schedule 4.13 Insurance
Schedule 7.1 Existing Indebtedness
Schedule 7.2 Existing Liens
Schedule 7.4 Existing Investments
Schedule 7.10 Existing Restrictions
EXHIBITS:
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Opinion of Borrower's Counsel
Exhibit C Form of Note
Exhibit D Form of Guarantee Agreement
<PAGE> 6
CREDIT AGREEMENT, dated as of June 30, 1999, among THE BISYS GROUP,
INC., the LENDERS party hereto, THE CHASE MANHATTAN BANK, THE FIRST NATIONAL
BANK OF CHICAGO, FIRST UNION NATIONAL BANK and FLEET BANK, NATIONAL ASSOCIATION,
as co-agents hereunder, and THE BANK OF NEW YORK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 Defined Terms
As used in this Credit Agreement, the following terms have the
meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"Acquisition Related Contingent Payment" means a payment
constituting all or a portion of the purchase price payable in connection with
an acquisition permitted by Section 7.4(l), the maximum aggregate potential
amount of which payments cannot be determined in advance of the occurrence or
non-occurrence after the closing date of such acquisition of certain
contingencies.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means BNY, in its capacity as
administrative agent for the Lenders hereunder.
"Administrative Questionnaire" an Administrative Questionnaire
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the greater of (a) the Prime Rate in effect on such day and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in
the Alternate Base Rate due to a
<PAGE> 7
change in the Prime Rate or the Federal Funds Effective Rate shall be effective
from and including the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.
"Applicable Margin" means, at all times during the applicable
periods set forth below: (a) with respect to ABR Borrowings, the percentage set
forth below under the heading "ABR Margin" and adjacent to such period and (b)
with respect to Eurodollar Borrowings and fees payable under Section 3.3(b), the
percentage set forth below under the heading "Eurodollar and LC Margin" and
adjacent to such period and (c) with respect to the fees payable under Section
3.3(a), the percentage set forth below under the heading "Fee Margin" and
adjacent to such period:
<TABLE>
<CAPTION>
When the
Leverage Ratio is Eurodollar and
greater than or equal to and less than ABR Margin LC Margin Fee Margin
- -------------------------- -------------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
1.00:1.00 0.00% 0.55% 0.200%
1.00:1.00 2.00:1.00 0.00% 0.650% 0.225%
2.00:1.00 3.00:1.00 0.00% 0.875% 0.250%
3.00:1.00 0.00% 1.325% 0.300%
</TABLE>
Changes in the Applicable Margin resulting from a change in
the Leverage Ratio shall be based upon the certificate most recently delivered
under Section 6.1(c) and shall become effective on the date such certificate is
delivered to the Administrative Agent. Notwithstanding anything to the contrary
in this definition, (i) if the Borrower shall fail to deliver to the
Administrative Agent such a certificate on or prior to any date required hereby,
the Leverage Ratio shall be deemed to be 3.00:1.00 from and including such date
to the date of delivery to the Administrative Agent of such certificate, and
(ii) during the period commencing on the Effective Date and ending on the date
of delivery of the first such certificate, the Leverage Ratio shall be deemed to
be the Leverage Ratio set forth in the certificate delivered under Section
5.1(l).
"Applicable Percentage" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Approved Fund" means, with respect to any Lender that is a
fund that invests in commercial loans, any other fund that invests in commercial
loans and is
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<PAGE> 8
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 10.4), and accepted by the Administrative Agent,
substantially in the form of Exhibit A or any other form approved by the
Administrative Agent.
"Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"BNY" means The Bank of New York.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" means The BISYS Group, Inc., a Delaware
corporation.
"Borrowing" means (a) Revolving Loans of the same Type made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect, (b) a Competitive Loan or a
group of Competitive Loans of the same Type made on the same date and as to
which a single Interest Period is in effect or (c) a Swingline Loan.
"Borrowing Request" means a request by the Borrower for a
Revolving Borrowing in accordance with Section 2.3.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed, provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Expenditures" of any Person means expenditures
(whether paid in cash or other consideration or accrued as a liability) for
fixed or capital assets (excluding any capitalized interest and any such asset
acquired in connection with normal replacement and maintenance programs properly
charged to current operations and excluding any replacement assets acquired with
the proceeds of insurance) made by such Person.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are
- 3 -
<PAGE> 9
required to be classified and accounted for as capital leases on a balance sheet
of such Person under GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
"Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof),
of shares representing 25% or more of the aggregate ordinary voting power or
economic interests represented by the issued and outstanding equity securities
of the Borrower on a fully diluted basis, or (b) the occupation of a majority of
the seats (other than vacant seats) on the board of directors of the Borrower by
Persons who were neither (i) nominated by the board of directors of the Borrower
nor (ii) appointed by directors so nominated.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Credit Agreement, (b) any change in any law,
rule or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Credit Agreement or (c) compliance
by any Credit Party (or, for purposes of Section 3.5(b), by any lending office
of such Credit Party or by such Credit Party's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Credit Agreement.
"Class" when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
Revolving Loans, Competitive Loans or Swingline Loans.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and to acquire participations
in Letters of Credit and Swingline Loans hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's Revolving Credit
Exposure hereunder, as such commitment may be reduced or increased from time to
time pursuant to Section 2.7 or pursuant to assignments by or to such Lender
pursuant to Section 10.4. The initial amount of each Lender's Commitment is set
forth on Schedule 2.1, or in the Assignment and Acceptance pursuant to which
such Lender shall have assumed its Commitment, as applicable. The initial
aggregate amount of the Commitments is $200,000,000.
"Compensation Financing" means, as to any Subsidiary which is
a principal underwriter or distributor of shares of an Investment Company and is
so designated in such Investment Company's then effective registration
statement, either
- 4 -
<PAGE> 10
(i) the incurrence by such Subsidiary, as such principal underwriter or
distributor, of Indebtedness, the proceeds of which are loaned by it to a broker
or dealer entitled to compensation in connection with the sale of shares of such
Investment Company, which loan is to be repaid by such broker or dealer at the
time of its receipt of Contingent Deferred Sales Commissions or 12b-1 Fees to
which such broker or dealer is entitled as a result of such sale or (ii) the
sale by such Subsidiary as such principal underwriter or distributor of
Contingent Deferred Sales Commissions or 12b-1 Fees to which such principal
underwriter or distributor is entitled in connection with the sale of shares of
such Investment Company.
"Competitive Bid" means an offer by a Lender to make a
Competitive Loan in accordance with Section 2.4.
"Competitive Bid Rate" means, with respect to any Competitive
Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making
such Competitive Bid.
"Competitive Bid Request" means a request by the Borrower for
Competitive Bids in accordance with Section 2.4.
"Competitive Loan" means a Loan in dollars made pursuant to
Section 2.4.
"Consolidated Adjusted EBITDA" means for any period,
Consolidated EBITDA for such period plus the sum of, without duplication, to the
extent deducted in determining Consolidated EBITDA, (i) an amount equal to
transaction-related charges related to acquisitions permitted by Section 7.4(l)
made under the "pooling method" permitted by GAAP after the Effective Date (not
in excess of 20% of the total consideration in respect of any such acquisition
and $50,000,000 in the aggregate for all such acquisitions), and (ii) an amount
equal to (x) the total fees paid to Persons in connection with the acquisition
of rights permitted by Section 7.4(k) made after the Effective Date (not in
excess of $50,000,000 in the aggregate for all such fees for all such
acquisitions), minus (y) the amount thereof which would be amortized during such
period if such fees were amortizable and assuming a five year useful life
thereof.
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period plus the sum of, without duplication, (i) Consolidated
Interest Expense, (ii) provision for income taxes and (iii) depreciation,
amortization and all other non-cash charges for such period of the Borrower and
the Subsidiaries determined on a consolidated basis in accordance with GAAP,
each to the extent deducted in determining Consolidated Net Income for such
period and minus the sum of non-cash gains for such period to the extent
included in determining Consolidated Net Income for such period. For purposes of
this definition, "Consolidated Net Income" and "Consolidated Interest
- 5 -
<PAGE> 11
Expense" shall not include any amounts earned by the Borrower or any of the
Subsidiaries in connection with Compensation Financings permitted pursuant to
Section 7.1(a)(xi).
"Consolidated Fixed Charges" means, for any period, the sum
for such period of, without duplication, the following items, each for the
Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP:
(i) all scheduled payments of principal of Indebtedness, (ii) all payments in
respect of Capitalized Lease obligations, (iii) Consolidated Interest Expense,
(iv) Acquisition Related Contingent Payments (whether paid or accrued), and (iv)
regularly scheduled principal payments on subordinated Indebtedness of the
Borrower or any of the Subsidiaries permitted pursuant to Section 7.1(a)(xvi) to
the extent the same is permitted to be paid pursuant to the subordination
provisions thereof.
"Consolidated Interest Expense" means, for any period, the sum
of, without duplication, all interest (adjusted to give effect to all interest
rate swap, cap, collar or other interest rate hedging arrangements and non-cash
amortization of fees in connection therewith, all as determined on a
consolidated basis in accordance with GAAP), paid or accrued in respect of
Indebtedness of the Borrower and the Subsidiaries on a consolidated basis in
accordance with GAAP during such period.
"Consolidated Net Income" means, for any period, the sum of,
without duplication, net income of the Borrower and the Subsidiaries, determined
on a consolidated basis in accordance with GAAP for such period.
"Consolidated Net Worth" means, at any date of determination,
the sum of all amounts which would be included under shareholders' equity on a
consolidated balance sheet of the Borrower and the Subsidiaries determined on a
consolidated basis in accordance with GAAP as at such date.
"Consolidated Total Assets" means, at any date of
determination, the total assets of the Borrower and the Subsidiaries determined
on a consolidated basis in accordance with GAAP as at such date.
"Consolidated Total Debt" means, at any date of determination,
the aggregate funded Indebtedness (including Capital Lease Obligations) on such
date of the Borrower and the Subsidiaries on a consolidated basis in accordance
with GAAP.
"Contingent Deferred Sales Commissions" means amounts owed by
an Investment Company to the principal underwriter or distributor thereof (as
designated in such Investment Company's then effective registration statement
under the 1940 Act) as repayment for expenses incurred by such principal
underwriter or distributor pursuant to a written plan adopted by the
shareholders of such Investment Company.
- 6 -
<PAGE> 12
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. The terms "Controlling" and "Controlled" have meanings correlative
thereto.
"Credit Parties" means the Administrative Agent, the Issuing
Bank and the Lenders.
"Domestic Subsidiary" means each Subsidiary that is organized
under the laws of the United States or any State thereof.
"Default" means any event or condition which constitutes an
Event of Default or that upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 4.6.
"dollars" or "$" refers to lawful money of the United States
of America.
"Effective Date" means the date on which the conditions
specified in Section 5.1 are satisfied (or waived in accordance with Section
10.2).
"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of any Loan Party directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower or any Subsidiary, is treated as
a single employer under Section 414(b) or (c) of the Code or, solely for
purposes of Section 302
- 7 -
<PAGE> 13
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any ERISA Affiliate
of any liability under Title IV of ERISA with respect to the termination of any
Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan
or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by
the Borrower or any ERISA Affiliate of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in
Article 8.
"Excluded Taxes" means, with respect to any Credit Party or
any other recipient of any payment to be made by or on account of any obligation
of any Loan Party under any Loan Document, (a) income or franchise taxes imposed
on (or measured by) its net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Credit Party, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which such Loan Party is located and (c) in the case of a
Foreign Lender, any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Credit
Agreement (or designates a new lending office) or is attributable to such
Foreign Lender's failure to comply with Section 3.7(e), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from such Loan Party with respect to such withholding tax pursuant to
Section 3.7(a).
- 8 -
<PAGE> 14
"Exempt Subsidiary" means each Subsidiary for so long as it is
(i) a registered broker-dealer, (ii) engaged in the insurance business and
subject to net capital rules or regulations of any Governmental Authority which
would treat the Guarantee under the Guarantee Agreement as a liability for
purposes thereof if such Subsidiary was a Subsidiary Guarantor, or (iii) holding
no assets and conducting no business.
"Existing Letter of Credit" means any Letter of Credit set
forth in Schedule 1.1, but not any renewal or extension thereof.
"Federal Funds Effective Rate" means, for any day, a rate per
annum (expressed as a decimal, rounded upwards, if necessary, to the next higher
1/100 of 1%) equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day, provided that (i) if the
day for which such rate is to be determined is not a Business Day, the Federal
Funds Effective Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if such rate is not so published for any day, the Federal Funds
Effective Rate for such day shall be the average of the quotations for such day
on such transactions received by BNY as determined by BNY and reported to the
Administrative Agent.
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the Borrower.
"Fixed Charge Coverage Ratio" means, at any date of
determination, the ratio of (i) an amount equal to Consolidated Adjusted EBITDA
for the four fiscal quarter period ending on such date or, if such date is not
the last day of a fiscal quarter, for the immediately preceding four fiscal
quarter period minus Capital Expenditures made during such period by the
Borrower and the Subsidiaries minus income taxes paid during such period to (ii)
Consolidated Fixed Charges for such period.
"Fixed Rate" means, with respect to any Competitive Loan
(other than a Eurodollar Competitive Loan), the fixed rate of interest per annum
specified by the Lender making such Competitive Loan in its related Competitive
Bid.
"Fixed Rate Loan" means a Competitive Loan bearing interest at
a Fixed Rate.
"Foreign Lender" means any Lender that is organized under the
laws of a jurisdiction other than that in which the applicable Loan Party is
located. For purposes of this definition, the United States of America, each
State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.
- 9 -
<PAGE> 15
"Foreign Subsidiary" means each Subsidiary that is not a
Domestic Subsidiary.
"GAAP" means generally accepted accounting principles in the
United States of America.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor as to enable the primary obligor
to pay such Indebtedness or other obligation or (d) as an account party in
respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation, provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guaranteed" has a meaning correlative thereto.
"Guarantee Agreement" means the Guarantee Agreement,
substantially in the form of Exhibit D, among the Subsidiary Guarantors and the
Administrative Agent.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of
- 10 -
<PAGE> 16
any kind, (b) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, (c) all obligations of such Person upon which
interest charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding accounts payable,
obligations under equipment servicing agreements and license, royalty and
similar fees, in each case incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning assigned to such term in Section
10.3(b).
"Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 3.2.
"Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each March, June, September and December, (b) with respect
to any Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar Loan
with an Interest Period of more than three months' duration, each day prior to
the last day of such Interest Period that occurs at intervals of three months'
duration after the first day of such Interest Period, (c) with respect to any
Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Fixed Rate Loan with an
Interest Period of more than 90 days' duration (unless otherwise specified in
the applicable Competitive Bid Request), each day prior to the last day of such
Interest Period that occurs at intervals of 90 days' duration after the first
day of such Interest Period, and any other dates that are specified in the
applicable Competitive Bid Request as Interest Payment Dates with respect to
such Borrowing and (d) with respect to any Swingline Loan, the day that such
Swingline Loan is required to be repaid.
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<PAGE> 17
"Interest Period" means (a) with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months thereafter, as the Borrower may elect and (b) with respect to any
Fixed Rate Borrowing, the period (which shall not be less than seven days or
more than 180 days) commencing on the date of such Borrowing and ending on the
date specified in the applicable Competitive Bid Request; provided that (i) if
any Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day, unless, in the
case of a Eurodollar Borrowing only, such next succeeding Business Day would
fall in the next calendar month, in which case such Interest Period shall end on
the next preceding Business Day, (ii) any Interest Period pertaining to a
Eurodollar Borrowing that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made, and,
in the case of Revolving Borrowing, thereafter shall be the effective date of
the most recent conversion or continuation of such Borrowing.
"Issuing Bank" means BNY, in its capacity as issuer of Letters
of Credit.
"Investment Company" means an investment company registered
under the 1940 Act.
"LC Disbursement" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.1 and any
other Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance. Unless the context otherwise requires, the term
"Lenders" includes the Swingline Lender.
"Letter of Credit" means any Existing Letter of Credit and any
New Letter of Credit.
"Leverage Ratio" means, at any date of determination, the
ratio of (i) Consolidated Total Debt on such date to (ii) Consolidated Adjusted
EBITDA for the
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<PAGE> 18
four fiscal quarter period ending on such date or, if such date is not the last
day of a fiscal quarter, for the immediately preceding four fiscal quarter
period. For purposes of this definition, "Consolidated Total Debt" shall not
include any Indebtedness incurred by the Borrower or any of the Subsidiaries in
connection with Compensation Financings to the extent permitted by Section
7.1(a)(xi).
"LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate of interest per annum as determined by the
Administrative Agent, equal to the rate, as reported by BNY to the
Administrative Agent, quoted by BNY to leading banks in the London interbank
market as the rate at which BNY is offering dollar deposits in an amount
approximately equal to its ratable share of such Eurodollar Borrowing for dollar
deposits with a maturity comparable to such Interest Period at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
"Loan Documents" means this Credit Agreement, the promissory
notes delivered pursuant to this Credit Agreement and the Guarantee Agreement.
"Loan Parties" means the Borrower and the Subsidiary
Guarantors.
"Loans" means the loans made by the Lenders to the Borrower
pursuant to this Credit Agreement.
"Margin" means, with respect to any Competitive Loan bearing
interest at a rate based on the Adjusted LIBO Rate, the marginal rate of
interest, if any, to be added to or subtracted from the Adjusted LIBO Rate to
determine the rate of interest applicable to such Loan, as specified by the
Lender making such Loan in its related Competitive Bid.
"Margin Stock" has the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and the Subsidiaries, taken as a whole, (b) the
ability of any Loan Party to perform any of its obligations under any Loan
Document or (c) the rights of or benefits available to any Credit Party under
any Loan Document.
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<PAGE> 19
"Material Indebtedness" means Indebtedness (other than
Indebtedness under the Loan Documents) or obligations in respect of one or more
Hedging Agreements, of any one or more of the Borrower and the Subsidiaries in
an aggregate principal amount exceeding $5,000,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the Borrower
or any Subsidiary in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary, as applicable, would be required to pay if such
Hedging Agreement were terminated at such time.
"Maturity Date" means June 30, 2004.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"1940 Act" means the Investment Company Act of 1940, as
amended, and the Rules promulgated thereunder, as amended.
"New Letter of Credit" means any letter of credit issued
pursuant to this Credit Agreement and any successive renewals or extensions
thereof.
"Obligations" means (a) the due and punctual payment of (i)
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, and (ii) each payment required to be
made by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral, and
(iii) all other monetary obligations, including fees, commissions, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Loan Parties to the
Credit Parties, or that are otherwise payable to any Credit Party, under the
Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of the
Loan Parties under or pursuant to the Credit Agreement and the other Loan
Documents and (c) unless otherwise agreed upon in writing by the applicable
Lender party thereto, all obligations of the Borrower, monetary or otherwise,
under each interest rate protection agreement entered into with a counterparty
and that was a Lender (or an Affiliate thereof) at the time such interest rate
protection agreement was entered into.
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<PAGE> 20
"Other Taxes" means any and all current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, the Loan Documents.
"Participant" has the meaning assigned to such term in Section
10.4(e).
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet
due or are being contested in compliance with Section 6.4;
(b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's and other like Liens imposed by law, arising
in the ordinary course of business and securing obligations that are
not overdue by more than 30 days or are being contested in compliance
with Section 6.4;
(c) pledges and deposits made in the ordinary course
of business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case
in the ordinary course of business;
(e) judgment liens in respect of judgments that do
not constitute an Event of Default under clause (k) of Article 8; and
(f) easements, zoning restrictions, rights-of-way and
similar encumbrances on real property imposed by law or arising in the
ordinary course of business that do not secure any monetary obligations
and do not materially detract from the value of the affected property
or interfere with the ordinary conduct of business of the Borrower or
any Subsidiary.
"Permitted Investments" means:
(a) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by,
the United States of America (or by any agency thereof to the extent
that such obligations are backed by the full faith and credit of the
United States of America), in each case maturing within six months from
the date of acquisition thereof;
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<PAGE> 21
(b) dollar denominated investments in certificates of
deposit, banker's acceptances and time deposits maturing within 180
days from the date of acquisition thereof issued or guaranteed by or
placed with any Lender or any other bank whose (or whose parent
company's) unsecured non-credit supported short-term commercial paper
rating is (i) at least A-1 or the equivalent thereof from Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, or
any successor thereto, or (ii) at least P-1 or the equivalent thereof
from Moody's Investors Service, Inc. or any successor thereto;
(c) investments in commercial paper maturing within
six months from the date of acquisition thereof (i) issued by any
Lender or any other bank satisfying the criteria described in clause
(b) of this definition (or by the parent company thereof), (ii) issued
by, or guaranteed by, any industrial or financial company whose
unsecured non-credit supported commercial paper rating is (A) at least
A-1 or the equivalent thereof from Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, or any successor thereto, or
(B) at least P-1 or the equivalent thereof from Moody's Investors
Service, Inc. or any successor thereto or (iii) guaranteed by any
industrial or financial company with a long term unsecured non-credit
supported senior debt rating of at least A or A-2, or the equivalent
thereof, from Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, or any successor thereto or Moody's Investors
Service, Inc. or any successor thereto;
(d) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by,
any State of the United States of America or any political subdivision
of any State or any public instrumentality thereof, in each case
maturing within six months from the date of acquisition thereof and, at
the time of acquisition thereof, having one of the two highest ratings
obtainable from Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, or any successor thereto or Moody's Investors
Service, Inc. or any successor thereto;
(e) fully collateralized repurchase agreements with a
term of not more than 30 days for securities described in clause (a) of
this definition and entered into with any Lender or any other bank
satisfying the criteria described in clause (b) of this definition; and
(f) investments in money market funds substantially
all the assets of which are comprised of securities of the types
described in clauses (a) through (e) of this definition.
"Permitted Notes" means general, unsecured obligations of the
Borrower, with a maturity date later than the Maturity Date, with covenants no
more restrictive to
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<PAGE> 22
the Borrower and the Subsidiaries than the covenants under this Credit
Agreement, and with events of default no more extensive than the Events of
Default.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower,
any Subsidiary or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by BNY as its prime rate in effect at its principal
office in New York City; each change in the Prime Rate shall be effective from
and including the date such change is publicly announced as being effective. The
Prime Rate is not intended to be lowest rate of interest charged by BNY in
connection with extensions of credit to borrowers.
"Prior Agreement" means Credit Agreement, dated as of March 5,
1997, as amended, by and among the Borrower, the lenders party hereto and The
Bank of New York, as agent.
"Register" has the meaning assigned to such term in Section
10.4(c).
"Regulation T" means Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" means Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" means Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Required Lenders" means, at any time, Lenders having
Revolving Credit Exposures and unused Commitments representing more than 66-2/3%
of the sum of the total Revolving Credit Exposures and unused Commitments at
such time provided that, for purposes of declaring the Loans to be due and
payable pursuant to Article 8, and for all purposes after the Loans become due
and payable pursuant to Article 8 or the
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<PAGE> 23
Commitments expire or terminate, the outstanding Competitive Loans of the
Lenders shall be included in their respective Revolving Credit Exposures in
determining the Required Lenders.
"Responsible Officer" means as to any Person, its President,
Chief Financial Officer, Treasurer, General Counsel, Secretary, any Vice
President, Assistant Secretary, Assistant Treasurer, or any other individual
responsible for (i) the management of the Borrower or any of the Subsidiaries or
(ii) monitoring or ensuring compliance with the Loan Documents.
"Restricted Payment" means, as to any Person, any dividend or
other distribution by such Person (whether in cash, securities or other
property) with respect to any shares of any class of equity securities of such
Person, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
shares or any option, warrant or other right to acquire any such shares.
"Revolving Credit Exposure" means, with respect to any Lender
at any time, the sum of the aggregate outstanding principal amount of such
Lender's Revolving Loans, LC Exposure and its Swingline Exposure at such time.
"Revolving Loan" means a Loan referred to in Section 2.1 and
made pursuant to Section 2.3.
"Rule 12b-1" means Rule 12b-1 promulgated under the 1940 Act.
"Securitization" means the transfer or pledge of assets or
interests in assets to a trust, partnership, corporation or other entity, which
transfer or pledge is funded by such entity in whole or in part by the issuance
of instruments or securities that are paid principally from the cash flow
derived from such assets or interests in assets.
"Significant Subsidiary" means any Subsidiary which, as of the
last day of the most recently completed fiscal quarter, satisfies any one or
more of the following three tests: (i) the Borrower and the other Subsidiaries'
investments in and advances to such Subsidiary exceed 10% of Consolidated Total
Assets, (ii) the Borrower and the other Subsidiaries' proportionate share of
Consolidated Total Assets (after intercompany eliminations) consisting of the
property of such Subsidiary exceeds 10% of Consolidated Total Assets or (iii)
the Borrower and the other Subsidiaries' equity in the income (not to include
losses) from continuing operations before income taxes, extraordinary items and
the cumulative effect of a change in accounting principle of such Subsidiary
exceeds 10% of the income (to include losses) from continuing operations before
income taxes, extraordinary items and the cumulative effect of a change in
accounting principle of the
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<PAGE> 24
Borrower and the Subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board). Such reserve percentages shall
include those imposed pursuant to such Regulation D. Eurodollar Loans shall be
deemed to constitute eurocurrency funding and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under such Regulation D or
any comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held by the parent or one
or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower.
"Subsidiary Guarantor" means any Domestic Subsidiary (other
than an Exempt Subsidiary) that executes and delivers the Guarantee Agreement,
in each case in accordance with Sections 5.1(g) and 6.10.
"Swingline Commitment" means, with respect to the Swingline
Lender, the commitment of the Swingline Lender to make Swingline Loans
hereunder. The initial amount of the Swingline Lender's Swingline Commitment is
$10,000,000.
"Swingline Exposure" means, at any time, the aggregate
principal amount of all Swingline Loans outstanding at such time. The Swingline
Exposure of any Lender at any time shall be its pro rata percentage based on the
unused Commitments of the total Swingline Loans at such time.
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<PAGE> 25
"Swingline Lender" means BNY in its capacity as lender of
Swingline Loans hereunder.
"Swingline Loan" means a Loan in dollars made pursuant to
Section 2.5.
"Swingline Rate" means, with respect to each Swingline Loan,
the rate per annum agreed to by the Borrower and the Swingline Lender in
accordance with Section 2.5(b) as the interest rate that such Swingline Loan
shall bear.
"Taxes" means any and all current or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Transactions" means (a) the execution, delivery and
performance by each Loan Party of each Loan Document to which it is a party, (b)
the borrowing of the Loans and the issuance of the Letters of Credit and (c) the
use of the proceeds of the Loans and the Letters of Credit.
"12b-1 Fees" means all fees and distribution or other expenses
incurred under a plan adopted pursuant to Rule 12b-1 under the 1940 Act.
"Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to (i) in the case of a Revolving
Loan or Borrowing, the Adjusted LIBO Rate or the Alternate Base Rate, (ii) in
the case of a Swingline Loan, the Swingline Rate or (iii) in the case of a
Competitive Loan or Borrowing, the Adjusted LIBO Rate or a Fixed Rate.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.2 Classification of Loans and Borrowings
For purposes of this Credit Agreement, Loans may be classified
and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a
"Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan").
Borrowings may also be classified and referred to by Class (e.g., a "Revolving
Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type
(e.g., a "Eurodollar Revolving Borrowing")
Section 1.3 Terms Generally
The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall
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<PAGE> 26
include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise,
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (c) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to
this Credit Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, this Credit Agreement and (e) the words "asset" and "property"
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
Section 1.4 Accounting Terms; GAAP
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time, provided that, if the Borrower notifies the
Administrative Agent that the Borrower requests an amendment to any provision
hereof to eliminate the effect of any change occurring after the date hereof in
GAAP or in the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith. Unless the context otherwise requires, any reference to a
fiscal period shall refer to the relevant fiscal period of the Borrower.
ARTICLE 2. THE CREDITS
Section 2.1 Commitments
Subject to the terms and conditions set forth herein, each
Lender agrees to make Revolving Loans to the Borrower from time to time during
the Availability Period in an aggregate principal amount that will not result in
(i) such Lender's Revolving Credit Exposure exceeding such Lender's Commitment
or (ii) the sum of the total Revolving Credit Exposures plus the aggregate
principal amount of outstanding Competitive Loans
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<PAGE> 27
exceeding the total Commitments. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrower may borrow, prepay and
reborrow Revolving Loans.
Section 2.2 Loans and Borrowings
(a) Each Revolving Loan shall be made as part of a Borrowing
consisting of Revolving Loans made by the Lenders ratably in accordance with
their respective Commitments. Each Competitive Loan shall be made in accordance
with the procedures set forth in Section 2.4. The failure of any Lender to make
any Loan required to be made by it shall not relieve any other Lender of its
obligations hereunder, provided that the Commitments and Competitive Bids of the
Lenders are several, and no Lender shall be responsible for any other Lender's
failure to make Loans as required.
(b) Subject to Section 3.4, each (i) Revolving Borrowing shall
be comprised entirely of ABR Loans or Eurodollar Loans and (ii) each Competitive
Borrowing shall be comprised entirely of Eurodollar Loans or Fixed Rate Loans,
in each case as the Borrower may request in accordance herewith. Each Swingline
Borrowing shall be a Swingline Loan. Each Lender at its option may make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan, provided that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Credit Agreement.
(c) At the commencement of each Interest Period for any
Eurodollar Revolving Borrowing, such Borrowing shall be in an aggregate amount
that is an integral multiple of $1,000,000 and not less than $3,000,000. At the
time that each ABR Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $500,000 and not less than $1,000,000;
provided that an ABR Borrowing may be in an aggregate amount that is equal to
the entire unused balance of the total Commitments or that is required to
finance the reimbursement of an LC Disbursement as contemplated by Section
2.10(e). Each Competitive Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $5,000,000. Each Swingline
Borrowing shall be in an aggregate amount that is an integral multiple of
$100,000 and not less than $500,000. Borrowings of more than one Type may be
outstanding at the same time, provided that there shall not at any time be more
than a total of ten Eurodollar Revolving Borrowings outstanding.
(d) Notwithstanding any other provision of this Credit
Agreement, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.
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<PAGE> 28
Section 2.3 Requests for Revolving Borrowings
To request a Revolving Borrowing, the Borrower shall notify
the Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before the date of the proposed Borrowing. Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.2:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a
Business Day;
(iii) whether such Borrowing is to be an ABR
Borrowing or a Eurodollar Revolving Borrowing;
(iv) in the case of a Eurodollar Revolving Borrowing,
the initial Interest Period to be applicable thereto, which
shall be a period contemplated by the definition of the term
"Interest Period"; and
(v) the location and number of the Borrower's account
to which funds are to be disbursed, which shall comply with
the requirements of Section 2.6.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Revolving Borrowing, then the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. Promptly following receipt of a Borrowing Request for a Revolving
Borrowing in accordance with this Section, the Administrative Agent shall advise
each Lender of the details thereof and of the amount of such Lender's Revolving
Loan to be made as part of the requested Borrowing.
Section 2.4 Competitive Bid Loans
(a) Subject to the terms and conditions set forth herein, from
time to time during the Availability Period, the Borrower may request
Competitive Bids for Competitive Loans denominated in dollars and may (but shall
not have any obligation to) accept Competitive Bids and borrow Competitive
Loans; provided that the aggregate principal amount of outstanding Competitive
Loans at any time shall not exceed an
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<PAGE> 29
amount equal to 50% of the total Commitments as of the date of such Borrowing.
To request Competitive Bids, the Borrower shall notify the Administrative Agent
of such request by telephone, in the case of a Eurodollar Borrowing, not later
than 11:00 a.m., New York City time, five Business Days before the date of the
proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than
10:00 a.m., New York City time, one Business Day before the date of the proposed
Borrowing; provided that the Borrower may submit in the aggregate up to (but not
more than) four Competitive Bid Requests on the same day, but a Competitive Bid
Request shall not be made within five Business Days after the date of any
previous Competitive Bid Request, unless any and all such previous Competitive
Bid Requests shall have been withdrawn or all Competitive Bids received in
response thereto rejected. Each such telephonic delivery or telecopy to the
Administrative Agent of a written Competitive Bid Request shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Competitive Bid Request in a form approved by the Administrative Agent and
signed by the Borrower. Each such telephonic and written Competitive Bid Request
shall specify the following information in compliance with Section 2.2:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a
Business Day;
(iii) whether such Borrowing is to be a Eurodollar
Borrowing or a Fixed Rate Borrowing;
(iv) the Interest Period to be applicable to such
Borrowing, which shall be a period contemplated by the
definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account
to which funds are to be disbursed, which shall comply with
the requirements of Section 2.2.
Promptly following receipt of a Competitive Bid Request in accordance with this
Section, the Administrative Agent shall notify the Lenders of the details
thereof by telecopy, inviting the Lenders to submit Competitive Bids.
(b) Each Lender may (but shall not have any obligation to)
make one or more Competitive Bids to the Borrower in response to a Competitive
Bid Request. Each Competitive Bid by a Lender must be in a form approved by the
Administrative Agent and must be received by the Administrative Agent by
telecopy, in the case of a Eurodollar Competitive Borrowing, not later than 9:30
a.m., New York City time, three Business Days before the proposed date of such
Competitive Borrowing, and in the case
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of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on the
proposed date of such Competitive Borrowing. Competitive Bids that do not
conform substantially to the form approved by the Administrative Agent may be
rejected by the Administrative Agent, and the Administrative Agent shall notify
the applicable Lender as promptly as practicable. Each Competitive Bid shall
specify (i) the principal amount (which shall be a minimum of $5,000,000 and an
integral multiple of $1,000,000 and which may equal the entire principal amount
of the Competitive Borrowing requested by the Borrower) of the Competitive Loan
or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or
Rates at which the Lender is prepared to make such Loan or Loans (expressed as a
percentage rate per annum in the form of a decimal to no more than four decimal
places) and (iii) the Interest Period applicable to each such Loan and the last
day thereof.
(c) The Administrative Agent shall promptly notify the
Borrower by telecopy of the Competitive Bid Rate and the principal amount
specified in each Competitive Bid and the identity of the Lender that shall have
made such Competitive Bid.
(d) Subject only to the provisions of this paragraph, the
Borrower may in its sole and absolute discretion accept or reject any
Competitive Bid. The Borrower shall notify the Administrative Agent by
telephone, confirmed by telecopy in a form approved by the Administrative Agent,
whether and to what extent it has decided to accept or reject each Competitive
Bid, in the case of a Eurodollar Competitive Borrowing, not later than 10:30
a.m., New York City time, three Business Days before the date of the proposed
Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than
10:30 a.m., New York City time, on the proposed date of the Competitive
Borrowing; provided that (i) the failure of the Borrower to give such notice
shall be deemed to be a rejection of each Competitive Bid, (ii) the Borrower
shall not accept a Competitive Bid made at a particular Competitive Bid Rate if
the Borrower rejects a Competitive Bid made at a lower Competitive Bid Rate,
(iii) the aggregate amount of the Competitive Bids accepted by the Borrower
shall not exceed the aggregate amount of the requested Competitive Borrowing
specified in the related Competitive Bid Request, (iv) to the extent necessary
to comply with clause (iii) above, the Borrower may accept Competitive Bids at
the same Competitive Bid Rate in part, which acceptance, in the case of multiple
Competitive Bids at such Competitive Bid Rate, shall be made pro rata in
accordance with the amount of each Competitive Bid, and (v) except pursuant to
clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan
unless such Competitive Loan is in a minimum principal amount of $5,000,000 and
an integral multiple of $1,000,000; provided further that if a Competitive Loan
must be in an amount less than $5,000,000 because of the provisions of clause
(iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any
integral multiple thereof, and in calculating the pro rata allocation of
acceptances of portions of multiple Competitive
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Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts
shall be rounded to integral multiples of $1,000,000 in a manner determined by
the Borrower. A notice given by the Borrower pursuant to this paragraph shall be
irrevocable.
(e) The Administrative Agent shall promptly notify each
bidding Lender by telecopy whether or not its Competitive Bid has been accepted
(and, if so, the amount and Competitive Bid Rate so accepted), and each
successful bidder will thereupon become bound, subject to the terms and
conditions hereof, to make the Competitive Loan in respect of which its
Competitive Bid has been accepted.
(f) If the Administrative Agent shall elect to submit a
Competitive Bid in its capacity as a Lender, it shall submit such Competitive
Bid directly to the Borrower at least one quarter of an hour earlier than the
time by which the other Lenders are required to submit their Competitive Bids to
the Administrative Agent pursuant to paragraph (b) of this Section.
Section 2.5 Swingline Loans
(a) Subject to the terms and conditions set forth herein, the
Swingline Lender agrees to make Swingline Loans to the Borrower in dollars from
time to time on any Business Day during the period from the Effective Date to
the sixth Business Day preceding the Maturity Date in an aggregate principal
amount at any time outstanding that will not result in (i) the Swingline
Exposure exceeding the Swingline Commitment or (ii) the sum of the total
Revolving Credit Exposures plus the aggregate principal amount of outstanding
Competitive Loans exceeding the total Commitments; provided that the Swingline
Lender shall not be required to make a Swingline Loan to refinance an
outstanding Swingline Loan. Notwithstanding the foregoing, the Swingline Lender
shall not be required to make a Swingline Loan if (A) any Lender shall be in
default of its obligations under this Credit Agreement or (B) any Credit Party
shall have notified the Swingline Lender and the Borrower in writing at least
one Business Day prior to the date of the proposed Borrowing of such Swingline
Loan that the conditions set forth in Section 5.3 have not been satisfied and
such conditions remain unsatisfied as of the requested time of the making of
such Swingline Loan, provided, further, that the Swingline Lender shall not make
such Swingline Loan if Credit Parties consisting of the Required Lenders shall
have so notified the Swingline Lender and the Borrower and the conditions with
respect to which such notice was provided remain unsatisfied as of the requested
time of the making of such Swingline Loan. Each Swingline Loan shall be due and
payable on the maturity thereof, provided that in no event shall such maturity
be later than the sixth Business Day preceding the Maturity Date.
(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent and the Swingline Lender by telephone (confirmed by
telecopy) no later than 2:00 p.m., New York City time, on the day of the
relevant Swingline Loan.
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Each such notice shall be irrevocable and shall specify (i) the aggregate
principal amount to be borrowed, (ii) the requested date (which shall be a
Business Day) and (iii) the requested Swingline Rate and the maturity date of
the requested Swingline Loan which shall be not later than seven Business Days
after the making of such Swingline Loan. Subject to its agreement with the
Borrower on the applicable Swingline Rate, the Swingline Lender will make the
requested amount available promptly on that same day by means of a credit to an
account designated in writing by the Borrower not less than one Business Day
prior to such Loan or, in the case of a Swingline Loan made to finance the
reimbursement of an LC Disbursement as provided in Section 2.10(e) by remittance
to the Issuing Bank.
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Lenders to acquire participations on such Business Day
in all or a portion of the Swingline Loans outstanding. Such notice shall
specify the aggregate amount of Swingline Loans in which the Lenders will
participate. Promptly upon receipt of such notice, the Administrative Agent will
give notice thereof to each Lender, specifying in such notice such Lender's pro
rata percentage of the unused Commitments of such Swingline Loan or Swingline
Loans. Each Lender hereby absolutely and unconditionally agrees, upon receipt of
notice as provided above, to pay to the Administrative Agent, for the account of
the Swingline Lender, such Lender's pro rata percentage of the unused
Commitments of such Swingline Loan or Swingline Loans. Each Lender acknowledges
and agrees that its obligation to acquire participations in Swingline Loans
pursuant to this paragraph is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner as
provided in Section 2.6 with respect to Loans made by such Lender (and Section
2.6 shall apply, mutatis mutandis, to the payment obligations of the Lenders),
and the Administrative Agent shall promptly pay to the Swingline Lender the
amounts so received by it from the Lenders. The Administrative Agent shall
notify the Borrower of any participations in any Swingline Loan acquired
pursuant to this paragraph, and thereafter payments in respect of such Swingline
Loan shall be made to the Administrative Agent and not to the Swingline Lender.
Any amounts received by the Swingline Lender from the Borrower (or other party
on behalf of the Borrower) in respect of a Swingline Loan after receipt by the
Swingline Lender of the proceeds of a sale of participations therein shall be
promptly remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the Swingline Lender, as their interests may appear. The purchase of
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<PAGE> 33
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof.
Section 2.6 Funding of Borrowings
(a) Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 1:00 p.m., New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders,
provided that Swingline Loans shall be made as provided in Section 2.5(a).
Subject to Section 5.3, the Administrative Agent will make such Loans available
to the Borrower by promptly crediting or otherwise transferring the amounts so
received, in like funds, to an account of the Borrower maintained with the
Administrative Agent and designated by the Borrower in the applicable Borrowing
Request or Competitive Bid Request, provided that ABR Revolving Loans made to
finance the reimbursement of an LC Disbursement as provided in Section 2.10(e)
shall be remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest
rate, without duplication, that would be otherwise applicable to such Borrowing.
If such Lender pays such amount to the Administrative Agent, then such amount
shall constitute such Lender's Loan included in such Borrowing.
Section 2.7 Termination and Reduction of Commitments
(a) Unless previously terminated, the Commitments shall
terminate on the Maturity Date.
(b) The Borrower may at any time terminate, or from time to
time reduce, the Commitments, provided that (i) the Borrower shall not terminate
or reduce the Commitments if, after giving effect to any concurrent prepayment
of the Loans in
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accordance with Section 2.9, the sum of the Revolving Credit Exposures plus the
aggregate principal amount of outstanding Competitive Bid Loans would exceed the
total Commitments, and (ii) each such reduction shall be in an amount that is an
integral multiple of $1,000,000 and not less than $3,000,000.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable, provided that a notice
of termination of the Commitments delivered by the Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments
hereunder shall be permanent. Each reduction of the Commitments hereunder shall
be made ratably among the Lenders in accordance with their respective
Commitments.
Section 2.8 Repayment of Loans; Evidence of Debt
(a) The Borrower hereby unconditionally promises to pay (i) to
the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Revolving Loan on the Maturity Date, (ii) to the
Administrative Agent for the account of each Lender, the then unpaid principal
of each Competitive Loan on the last day of the Interest Period applicable
thereto, and (iii) to the Swingline Lender the then unpaid principal amount of
each Swingline Loan on the earlier of (x) the maturity date selected by the
Borrower for such Swingline Loan and (y) the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the debt of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall, to the extent not inconsistent with
any entries made in any
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promissory note, be prima facie evidence of the existence and amounts of the
obligations recorded therein, provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Credit Agreement.
(e) Any Lender may request that the Loans made by it be
evidenced by one promissory note or that its Competitive Loans, Revolving Loans
and, in the case of the Swingline Lender, the Swingline Loans be evidenced by
separate promissory notes. In such event, the Borrower shall prepare, execute
and deliver to such Lender, a promissory note or notes payable to the order of
such Lender, each substantially in the form of Exhibit C (with appropriate
changes, if applicable, to reflect that such note evidences Revolving Loans,
Competitive Loans and/or Swingline Loans). In addition, if requested by a
Lender, its promissory note or notes may be made payable to such Lender and its
registered assigns in which case all Loans evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to
Section 10.4) be represented by one or more promissory notes in like form
payable to the order of the payee named therein and its registered assigns.
Section 2.9 Prepayment of Loans
(a) The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part, subject to the
requirements of this Section, provided that, Competitive Loans and Swingline
Loans may not be prepaid.
(b) In the event of any partial reduction or termination of
the Commitments, then (i) at or prior to the date of such reduction or
termination, the Administrative Agent shall notify the Borrower and the Lenders
of the sum of the Revolving Credit Exposures and the aggregate principal balance
of outstanding Competitive Loans after giving effect thereto and (ii) if such
sum would exceed the total Commitments after giving effect to such reduction or
termination, then the Borrower shall, on the date of such reduction or
termination, prepay Revolving Borrowings in an amount sufficient to eliminate
such excess.
(c) The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of prepayment or (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New
York City time, one Business Day before the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid, provided that, if a
notice of prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by Section 2.7, then such
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notice of prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.7. Promptly following receipt of any such notice
relating to a Revolving Borrowing, the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any Revolving
Borrowing under Sections 2.7(b) and 2.9(a) shall, when added to the amount of
each concurrent reduction of the Commitments and prepayment of Borrowings under
such Sections, be in an integral multiple of $1,000,000 and not less than
$3,000,000. Each prepayment of a Revolving Borrowing shall be applied ratably to
the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by
accrued interest to the extent required by Section 3.1.
(d) All prepayments shall be subject to Section 3.6, if
applicable.
Section 2.10 Letters of Credit
(a) General. Subject to the terms and conditions set forth
herein, the Borrower may request the issuance of New Letters of Credit
denominated in dollars for its own account, in a form reasonably acceptable to
the Administrative Agent and the Issuing Bank, at any time and from time to time
during the period from the Effective Date to the tenth Business Day prior to the
Maturity Date. In the event of any inconsistency between the terms and
conditions of this Credit Agreement and the terms and conditions of any form of
letter of credit application or other agreement submitted by the Borrower to, or
entered into by the Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Credit Agreement shall control.
(b) Notice of Issuance; Amendment; Renewal; Extension; Certain
Conditions. To request the issuance of a New Letter of Credit (or the amendment,
renewal or extension of an outstanding New Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (not later than three Business Days before the
requested date of issuance, amendment, renewal or extension) a notice requesting
the issuance of a New Letter of Credit, or identifying the New Letter of Credit
to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such New Letter of Credit is to expire (which shall comply with paragraph
(c) of this Section), the amount of such New Letter of Credit, the name and
address of the beneficiary thereof and such other information as shall be
necessary to prepare, amend, renew or extend such New Letter of Credit. If
requested by the Issuing Bank, the Borrower also shall submit a letter of credit
application on the Issuing Bank's standard form in connection with any request
for a New Letter of Credit. A New Letter of Credit shall be issued, amended,
renewed or extended only if (and, upon issuance, amendment, renewal or extension
of each New Letter of Credit, the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension, (i) the LC Exposure shall not exceed $20,000,000 and
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(ii) the sum of the total Revolving Credit Exposures plus the aggregate
principal amount of outstanding Competitive Loans shall not exceed the total
Commitments.
(c) Expiration Date. Each New Letter of Credit shall expire at
or prior to the close of business on the earlier of (i) the date that is one
year after the date of the issuance of such New Letter of Credit (or, in the
case of any renewal or extension thereof, one year after such renewal or
extension) and (ii) the date that is ten Business Days prior to the Maturity
Date, provided that any New Letter of Credit may provide for the renewal thereof
for additional one-year periods (which shall in no event extend beyond the date
that is ten Business Days prior to the Maturity Date).
(d) Participations. By the issuance of a New Letter of Credit
(or an amendment to a New Letter of Credit increasing the amount thereof) or, in
the case of an Existing Letter of Credit, the execution and delivery of this
Credit Agreement, and without any further action on the part of the Issuing Bank
or the Lenders, the Issuing Bank hereby grants to each Lender having a
Commitment, and each such Lender hereby acquires from the Issuing Bank, a
participation in each Letter of Credit equal to such Lender's Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each such Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the Issuing Bank, such Lender's Applicable Percentage of each
LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on
the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Borrower for any reason.
Each such Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever; provided, however,
that no Lender shall be obligated to make any payment to the Administrative
Agent for any wrongful LC Disbursement made by the Issuing Bank as a result of
acts or omissions constituting willful misconduct or gross negligence on the
part of the Issuing Bank.
(e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 4:00 p.m., New York City time, on the date that such
LC Disbursement is made, if the Borrower shall have received written notice (by
hand delivery or telecopy) of such LC Disbursement prior to 12:00 noon, New York
City time, on such date, or if such written notice has not been received by the
Borrower prior to such time on such date, then not later than 4:00 p.m., New
York City time, on (i) the Business Day that the Borrower receives such written
notice, if such written notice is received prior
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<PAGE> 38
to 12:00 noon, New York City time, on the day of receipt or (ii) the Business
Day immediately following the day that the Borrower receives such written
notice, if such written notice is not received prior to such time on the day of
receipt, provided that (A) in addition to such written notice, (x) the officers
of the Administrative Agent primarily responsible for the administration of this
Agreement shall, promptly after they receive notice that a draft in respect of
such LC Disbursement has been presented to the Issuing Bank, use reasonable
efforts to notify the Borrower of such draft by telephone and (y) the
Administrative Agent shall, promptly after it receives notice that such LC
Disbursement has been made, use reasonable efforts to notify the Borrower of
such LC Disbursement by telephone prior to the delivery of such written notice,
provided, further, that the failure of the Borrower to receive any such
telephonic notice from the Administrative Agent or any officer thereof shall not
in any manner affect the Borrower's obligation to reimburse such LC Disbursement
in accordance with the terms of this Section, and (B) if such LC Disbursement is
not less than $500,000, the Borrower may, subject to the conditions of borrowing
set forth herein, request in accordance with Section 2.3 or 2.5 that such
payment be financed with an ABR Revolving Borrowing or a Swingline Loan in an
equivalent amount and, to the extent so financed, the Borrower's obligation to
make such payment shall be discharged and replaced by the resulting ABR
Borrowing or Swingline Loan, as applicable. If the Borrower fails to make such
payment under this paragraph when due, the Administrative Agent shall notify
each Lender of the applicable LC Disbursement, the payment then due from the
Borrower in respect thereof and such Lender's Applicable Percentage thereof.
Promptly following receipt of such notice, each Lender shall pay to the
Administrative Agent its Applicable Percentage of the payment then due from the
Borrower, in the same manner as provided in Section 2.6 with respect to Loans
made by such Lender (and Section 2.6 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Lenders have made payments
pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders
and the Issuing Bank as their interests may appear. Any payment made by a Lender
pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement
(other than the funding of ABR Revolving Loans or Swingline Loans as
contemplated above) shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligations to
reimburse LC Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Credit Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or this Credit Agreement, or any term or
provision therein or herein, (ii) any draft or other
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document presented under a Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or inaccurate in
any respect, (iii) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the terms of
such Letter of Credit or (iv) any other event or circumstance whatsoever,
whether or not similar to any of the foregoing, that might, but for the
provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. Neither
any Credit Party nor any of their respective Related Parties shall have any
liability or responsibility by reason of or in connection with the issuance or
transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the Issuing Bank; provided
that the foregoing shall not be construed to excuse the Issuing Bank from
liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable law) suffered by the Borrower
that are caused by the Issuing Bank's failure to exercise care when determining
whether drafts and other documents presented under a Letter of Credit comply
with the terms thereof. The parties hereto expressly agree that, in the absence
of gross negligence or willful misconduct on the part of the Issuing Bank (as
finally determined by a court of competent jurisdiction), the Issuing Bank shall
be deemed to have exercised care in each such determination. In furtherance of
the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.
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(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Loans; provided that,
if the Borrower fails to reimburse such LC Disbursement when due pursuant to
paragraph (e) of this Section, then Section 3.1(d) shall apply. Interest accrued
pursuant to this paragraph shall be for the account of the Issuing Bank, except
that interest accrued on and after the date of payment by any Lender pursuant to
paragraph (e) of this Section to reimburse the Issuing Bank shall be for the
account of such Lender to the extent of such payment.
(i) Cash Collateralization. If any Event of Default shall
occur and be continuing, on the Business Day that the Borrower receives notice
from the Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, Lenders with LC Exposure representing greater
than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to the LC Exposure with respect
to Letters of Credit as of such date plus any accrued and unpaid interest
thereon; provided that the obligation to deposit such cash collateral shall
become effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in clause (h) or (i) of
Article 8. Such deposit shall be held by the Administrative Agent as collateral
for the payment and performance of the obligations of the Borrower under this
Credit Agreement. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account. Such
deposit shall not bear interest, nor shall the Administrative Agent be under any
obligation whatsoever to invest the same, provided, however, that, at the
request of the Borrower, such deposit shall be invested by the Administrative
Agent in direct short-term obligations of, or short-term obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America, in each case maturing no later than the expiry date of the
Letter of Credit giving rise to the relevant LC Exposure. Interest or profits,
if any, on such investments shall accumulate in such account. Moneys in such
account shall be applied by the Administrative Agent to reimburse the Issuing
Bank for LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Borrower for the LC Exposure at such time or, if the maturity
of the Loans has been accelerated (but subject to the consent of Lenders with LC
Exposure representing greater than 50% of the total LC Exposure), be applied to
satisfy other obligations of the Borrower under this Credit Agreement. If the
Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of
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an Event of Default, such amount (to the extent not applied as aforesaid) shall
be returned to the Borrower within three Business Days after all Events of
Default have been cured or waived.
Section 2.11 Payments Generally; Pro Rata Treatment; Sharing of Setoffs
(a) Each Loan Party shall make each payment required to be
made by it hereunder or under any other Loan Document (whether of principal of
Loans, LC Disbursements, interest or fees, or of amounts payable under Section
3.5, 3.6, 3.7 or 10.3, or otherwise) prior to 12:00 noon, New York City time, on
the date when due, in immediately available funds, without setoff or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its office at One
Wall Street, New York, New York, or such other office as to which the
Administrative Agent may notify the other parties hereto, except payments to be
made to the Issuing Bank or Swingline Lender as expressly provided herein and
except that payments pursuant to Sections 3.5, 3.6, 3.7 and 10.3 shall be made
directly to the Persons entitled thereto. The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal of
Loans, unreimbursed LC Disbursements, interest, fees and commissions then due
hereunder, such funds shall be applied (i) first, towards payment of interest,
fees and commissions then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest, fees and commissions then
due to such parties and (ii) second, towards payment of principal of Loans and
unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal of Loans and
unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of, or
interest on, any of its Revolving Loans or participations in LC Disbursements or
Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans and participations in
LC Disbursements or Swingline Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
and participations in LC Disbursements or Swingline Loans of
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other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of, and accrued interest on, their respective Loans and
participations in LC Disbursements or Swingline Loans, provided that (i) if any
such participations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Credit Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans or participations in LC Disbursements or Swingline Loans to any assignee
or participant, other than to the Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). Each Loan
Party consents to the foregoing and agrees, to the extent it may effectively do
so under applicable law, that any Lender acquiring a participation pursuant to
the foregoing arrangements may exercise against such Loan Party rights of setoff
and counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of such Loan Party in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice
from a Loan Party prior to the date on which any payment is due to the
Administrative Agent for the account of the applicable Credit Parties hereunder
that such Loan Party will not make such payment, the Administrative Agent may
assume that such Loan Party has made such payment on such date in accordance
herewith and may, in reliance upon such assumption, distribute to such Credit
Parties the amount due. In such event, if such Loan Party has not in fact made
such payment, then each such Credit Party severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Credit Party with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.
(e) If any Credit Party shall fail to make any payment
required to be made by it pursuant to Section 2.5(c), 2.6(b) or 2.10(e), then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Credit Party to satisfy such Credit Party's
obligations under such Sections until all such unsatisfied obligations are fully
paid.
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ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC.
Section 3.1 Interest
(a) The Loans comprising each ABR Borrowing (other than
Swingline Loans) shall bear interest at the Alternate Base Rate. Each Swingline
Loan shall bear interest at the Swingline Rate, unless a participation is
required to be made pursuant to Section 2.5(c), in which case such Loan shall
bear interest at the Alternate Base Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest (i) in the case of a Eurodollar Revolving Loan, at the Adjusted LIBO
Rate for the Interest Period in effect for such Borrowing plus the Applicable
Margin, or (ii) in the case of a Eurodollar Competitive Loan, at the Adjusted
LIBO Rate for the Interest Period in effect for such Borrowing plus (or minus,
as applicable) the Margin applicable to such Loan.
(c) Each Fixed Rate Loan shall bear interest at the Fixed Rate
applicable to such Loan.
(d) Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing, then, so long as such Event of Default is continuing
and to the extent permitted by applicable law, all principal of and interest on
each Loan and each fee and other amount (including reimbursement obligations in
respect of LC Disbursements) payable by the Borrower hereunder shall bear
interest, after as well as before judgment, at a rate per annum equal to (i) in
the case of principal of any Loan, 2% plus the rate otherwise applicable to such
Loan as provided in the preceding paragraphs of this Section or (ii) in the case
of any other amount, 2% plus the Alternate Base Rate plus the Applicable Margin.
(e) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan, provided that (i) interest accrued
pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than the prepayment
of an ABR Revolving Loan prior to the end of the Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment, (iii) in the event of any conversion of any
Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion, and (iv) all accrued interest shall be payable upon
termination of the Commitments.
(f) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis
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of a year of 365 days (or 366 days in a leap year), and in each case shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate
or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent clearly demonstrable error.
Section 3.2 Interest Elections
(a) Each Revolving Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar
Revolving Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such Borrowing,
and the Loans comprising each such portion shall be considered a separate
Borrowing. This Section shall not apply to Competitive Borrowings or Swingline
Borrowings which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.3 if the Borrower
were requesting a Revolving Borrowing of the Type resulting from such election
to be made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.2:
(i) the Borrowing to which such Interest Election
Request applies and, if different options are being elected with
respect to different portions thereof, the portions thereof to be
allocated to each resulting Borrowing (in which case the information to
be specified pursuant to clauses (iii) and (iv) of this paragraph shall
be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant
to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
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(iv) if the resulting Borrowing is a Eurodollar
Borrowing, the Interest Period to be applicable thereto after giving
effect to such election, which shall be a period contemplated by the
definition of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest
Election Request prior to the end of the Interest Period applicable thereto,
then, unless such Borrowing is repaid as provided herein, at the end of such
Interest Period, such Borrowing shall be converted to an ABR Borrowing.
Notwithstanding any contrary provision hereof, if an Event of Default has
occurred and is continuing and the Administrative Agent, at the request of the
Required Lenders, so notifies the Borrower, then, so long as an Event of Default
is continuing, (i) no outstanding Revolving Borrowing may be converted to or
continued as a Eurodollar Revolving Borrowing and (ii) unless repaid, each
Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end
of the Interest Period applicable thereto.
Section 3.3 Fees
(a) The Borrower agrees to pay to the Administrative Agent for
the account of each Lender, a facility fee, which shall accrue at a rate per
annum equal to the Applicable Margin on the daily amount of the Commitment of
such Lender (regardless of usage) during the period from and including the date
on which this Credit Agreement shall have become effective in accordance with
Section 10.6 to but excluding the date on which such Commitment terminates;
provided that, if such Lender continues to have any Revolving Credit Exposure
after its Commitment terminates, then such facility fee shall continue to accrue
on the daily amount of such Lender's Revolving Credit Exposure from and
including the date on which such Lender's Commitment terminates to but excluding
the date on which such Lender ceases to have any Revolving Credit Exposure.
Accrued facility fees shall be payable in arrears on the last day of March,
June, September and December of each year, each date on which the Commitments
are permanently reduced and on the date on which the Commitments terminate,
commencing on the first such date to occur after the date hereof, provided that
all unpaid facility fees shall be payable on the date on which the Commitments
terminate. All facility fees shall be computed on the basis of a year of 360
days and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).
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(b) The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at a rate per annum
equal to the Applicable Margin on the average daily amount of such Lender's LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date on which this
Credit Agreement shall become effective in accordance with Section 10.6 to but
excluding the later of the date on which such Lender's Commitment terminates and
the date on which such Lender ceases to have any LC Exposure and (ii) to the
Issuing Bank for its own account a fronting fee, which shall accrue at the rate
or rates per annum separately agreed upon between the Borrower and the Issuing
Bank on the average daily amount of the LC Exposure attributable to Letters of
Credit (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date on which this
Credit Agreement shall become effective in accordance with Section 10.6 to but
excluding the later of the date of termination of the Commitments and the date
on which there ceases to be any such LC Exposure, as well as the Issuing Bank's
standard fees with respect to the issuance, amendment, renewal or extension of
any Letter of Credit or processing of drawings thereunder, provided, that for
the purposes of this clause (ii) only, Existing Letters of Credit shall be
deemed to have been issued pursuant to this Credit Agreement. Accrued
participation fees and fronting fees shall be payable in arrears on the last day
of March, June, September and December of each year, commencing on the first
such date to occur after the date hereof; provided that all such fees shall be
payable on the date on which the Commitments terminate and any such fees
accruing after the date on which the Commitments terminate shall be payable on
demand. Any other fees payable to the Issuing Bank pursuant to this paragraph
shall be payable within ten days after demand. All participation fees and
fronting fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day).
(c) The Borrower agrees to pay to each Credit Party, for its
own account, fees and other amounts payable in the amounts and at the times
separately agreed upon between the Borrower and such Credit Party.
(d) All fees and other amounts payable hereunder shall be paid
on the dates due, in immediately available funds, to the Administrative Agent
(or to the Issuing Bank, in each case of fees payable to it) for distribution,
in the case of facility and participation fees, to the Lenders. Fees and other
amounts paid shall not be refundable under any circumstances.
Section 3.4 Alternate Rate of Interest
If prior to the commencement of any Interest Period for a
Eurodollar Borrowing:
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(a) the Administrative Agent determines (which
determination shall be conclusive absent manifest error) that adequate
and reasonable means do not exist for ascertaining the Adjusted LIBO
Rate or the LIBO Rate, as applicable, for such Interest Period; or
(b) the Administrative Agent is advised by any Lender
that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period will not adequately and fairly reflect the cost to such
Lender of making or maintaining its Loan included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurodollar Revolving Borrowing
shall be ineffective and any Eurodollar Revolving Borrowing so requested to be
continued shall be converted to an ABR Borrowing on the last day of the current
Interest Period with respect thereto, (ii) if any Borrowing Request requests a
Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing
and (iii) any request by the Borrower for a Eurodollar Competitive Borrowing
shall be ineffective; provided that if the circumstances giving rise to such
notice do not affect all the Lenders, then requests for Eurodollar Competitive
Borrowings may be made to Lenders that are not affected thereby.
Section 3.5 Increased Costs; Illegality
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Credit
Party (except any such reserve requirement reflected in the Adjusted
LIBO Rate);
(ii) impose on any Credit Party or the
London interbank market any other condition affecting this Credit
Agreement, any Eurodollar Loans made by such Credit Party or any
participation therein or any Letter of Credit or participation therein,
and the result of any of the foregoing shall be to increase the cost to such
Credit Party of making or maintaining any Eurodollar Loan or Fixed Rate Loan or
to increase the cost to such Credit Party of issuing, participating in or
maintaining any Letter of Credit hereunder or to increase the cost to such
Credit Party or to reduce the amount of any sum received or receivable by such
Credit Party hereunder (whether of principal, interest or
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otherwise), then the Borrower will pay to such Credit Party such additional
amount or amounts as will compensate such Credit Party for such additional costs
incurred or reduction suffered. Failure to demand compensation pursuant to this
Section shall not constitute a waiver of such Credit Party's right to demand
such compensation.
(b) If any Credit Party determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Credit Party's capital or on the capital of such Credit
Party's holding company, if any, as a consequence of this Credit Agreement or
the Loans made, the Letters of Credit issued or participations therein held by
such Credit Party to a level below that which such Credit Party or such Credit
Party's holding company could have achieved but for such Change in Law (taking
into consideration such Credit Party's policies and the policies of such Credit
Party's holding company with respect to capital adequacy), then from time to
time the Borrower will pay to such Credit Party such additional amount or
amounts as will compensate such Credit Party or such Credit Party's holding
company for any such reduction suffered.
(c) A certificate of a Credit Party setting forth the amount
or amounts necessary to compensate such Credit Party or its holding company, as
applicable, as specified in paragraph (a) or (b) of this Section shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Credit Party the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Credit Party to demand
compensation pursuant to this Section shall not constitute a waiver of such
Credit Party's right to demand such compensation; provided that the Borrower
shall not be required to compensate a Credit Party pursuant to this Section for
any increased costs or reductions incurred more than 90 days prior to the date
that such Credit Party notifies the Borrower of the Change in Law giving rise to
such increased costs or reductions and of such Credit Party's intention to claim
compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 90-day period
referred to above shall be extended to include the period of retroactive effect
thereof.
(e) Notwithstanding the foregoing provisions of this Section,
a Lender shall not be entitled to compensation pursuant to this Section in
respect of any Competitive Loan if the Change in Law that would otherwise
entitle it to such compensation shall have been publicly announced prior to the
submission of the Competitive Bid pursuant to which such Loan was made.
(f) Notwithstanding any other provision of this Credit
Agreement, if, after the date of this Credit Agreement, any Change in Law shall
make it unlawful for any Lender to make or maintain any Eurodollar Loan or to
give effect to its obligations as
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contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans
will not thereafter (for the duration of such unlawfulness) be made by
such Lender hereunder (or be continued for additional Interest Periods
and ABR Loans will not thereafter (for such duration) be converted into
Eurodollar Loans), whereupon any request for a Eurodollar Borrowing or
to convert an ABR Borrowing to a Eurodollar Borrowing or to continue a
Eurodollar Borrowing, as applicable, for an additional Interest Period
shall, as to such Lender only, be deemed a request for an ABR Loan (or
a request to continue an ABR Loan as such for an additional Interest
Period or to convert a Eurodollar Loan into an ABR Loan, as
applicable), unless such declaration shall be subsequently withdrawn;
and
(ii) such Lender may require that all outstanding
Eurodollar Loans made by it be converted to ABR Loans, in which event
all such Eurodollar Loans shall be automatically converted to ABR
Loans, as of the effective date of such notice as provided in the last
sentence of this paragraph.
In the event any Lender shall exercise its rights under (i) or (ii) of this
paragraph, all payments and prepayments of principal that would otherwise have
been applied to repay the Eurodollar Loans that would have been made by such
Lender or the converted Eurodollar Loans of such Lender shall instead be applied
to repay the ABR Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans, as applicable. For purposes of this
paragraph, a notice to the Borrower by any Lender shall be effective as to each
Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest
Period currently applicable to such Eurodollar Loan; in all other cases such
notice shall be effective on the date of receipt by the Borrower.
Section 3.6 Break Funding Payments
In the event of (a) the payment or prepayment (voluntary or
otherwise) of any principal of any Eurodollar Loan or Fixed Rate Loan other than
on the last day of an Interest Period applicable thereto or any Swingline Loan
other than on the maturity thereof (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked
under Section 2.9(c) and is revoked in accordance therewith), (d) the failure to
borrow any Competitive Loan after accepting the Competitive Bid to make such
Loan, or (e) the assignment of any Eurodollar Loan or Fixed Rate Loan other than
on the last day of the Interest Period or maturity date applicable thereto as a
result of a request by any Borrower pursuant to Section 3.8(b), then, in any
such event, the Borrower shall compensate each
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Lender for the loss, cost and expense attributable to such event, provided,
however, that, notwithstanding anything to the contrary herein, no such
compensation shall be payable for any loss, cost or expense attributable to any
payment made by the Borrower to the Administrative Agent under Section 2.6(b).
In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall
be deemed to include an amount determined by such Lender to be the excess, if
any, of (i) the amount of interest that would have accrued on the principal
amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that
would have been applicable to such Loan, for the period from the date of such
event to the last day of the then current Interest Period therefor (or, in the
case of a failure to borrow, convert or continue, for the period that would have
been the Interest Period for such Loan), over (ii) the amount of interest that
would accrue on such principal amount for such period at the interest rate that
such Lender would bid were it to bid, at the commencement of such period, for
dollar deposits of a comparable amount and period from other banks in the
eurodollar market. A certificate of any Lender setting forth any amount or
amounts that such Lender is entitled to receive pursuant to this Section shall
be delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
Section 3.7 Taxes
(a) Any and all payments by or on account of any obligation of
any Loan Party hereunder and under any other Loan Document shall be made free
and clear of and without deduction for any Indemnified Taxes or Other Taxes,
provided that, if such Loan Party shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section), the
applicable Credit Party receives an amount equal to the sum it would have
received had no such deductions been made, (ii) such Loan Party shall make such
deductions and (iii) such Loan Party shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Loan Parties shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law.
(c) Each Loan Party shall indemnify each Credit Party, within
ten days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by such Credit Party on or with respect to any payment
by or on account of any obligation of such Loan Party under the Loan Documents
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to
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the amount of such payment or liability delivered to the Borrower by a Credit
Party, or by the Administrative Agent on its own behalf or on behalf of a Credit
Party, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
relevant Loan Party is located, or any treaty to which such jurisdiction is a
party, with respect to payments under the Loan Documents shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law or reasonably requested by the Borrower as will
permit such payments to be made without withholding or at a reduced rate.
Section 3.8 Mitigation Obligations; Replacement of Lenders
(a) If any Credit Party requests compensation under Section
3.5, or if the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
3.7, then such Credit Party shall use reasonable efforts to designate a
different lending office for funding or booking its Loans or Letters of Credit
(or any participation therein) hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Credit Party, such designation or assignment (i) would eliminate or
reduce amounts payable pursuant to Section 3.5 or 3.7, as applicable, in the
future and (ii) would not subject such Credit Party to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Credit Party. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Credit Party in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 3.5, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.7, in
an aggregate amount in excess of $10,000, or if any Lender on three or more
separate occasions fails to fulfill its obligations to fund any Revolving Loan
or to participate in any Swingline Loan or any LC Disbursement, in each case on
the Business Day required therefor, then the Borrower may, at its sole expense
(including the fees referred to in Section 10.4(b)) and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
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delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 10.4), all its interests, rights and obligations under the
Loan Documents (other than any outstanding Competitive Loans held by it), to an
assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent (and,
if a Commitment is being assigned, the Issuing Bank and Swingline Lender), which
consent shall not unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans (other than
Competitive Loans) and participations in LC Disbursements and Swingline Loans,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 3.5 or payments required to be made pursuant to
Section 3.7, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Credit Parties
that:
Section 4.1 Organization; Powers
Each of the Borrower and the Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
Section 4.2 Authorization; Enforceability
The Transactions are within the corporate, partnership or
other analogous powers of each of the Borrower and the Subsidiary Guarantors to
the extent it is a party thereto and have been duly authorized by all necessary
corporate, partnership or other analogous and, if required, equityholder action.
Each Loan Document has been duly executed and delivered by each of the Borrower
and the Subsidiary Guarantors to the extent it is a party thereto and
constitutes a legal, valid and binding obligation thereof, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally.
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Section 4.3 Governmental Approvals; No Conflicts
The Transactions (a) do not require any consent or approval
of, registration or filing with, or any other action by, any Governmental
Authority, except such as have been obtained or made and are in full force and
effect, (b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of the Borrower or any of the
Subsidiaries or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon the Borrower or any of the Subsidiaries or its assets, or give rise to a
right thereunder to require any payment to be made by the Borrower or any of the
Subsidiaries, and (d) will not result in the creation or imposition of any Lien
on any asset of the Borrower or any of the Subsidiaries.
Section 4.4 Financial Condition; No Material Adverse Change
(a) The Borrower has heretofore furnished to the Credit
Parties (i) its Form 10-K for the fiscal year ended June 30, 1998 containing the
consolidated balance sheet and statements of income, stockholder's equity and
cash flows of the Borrower and the Subsidiaries as of and for the fiscal year
ended June 30, 1998 and June 30, 1997 reported on by Price WaterhouseCoopers
independent public accountants, and (ii) its Form 10-Q for the fiscal quarter
ended March 31, 1999 containing the consolidated balance sheet and statements of
income and cash flows of the Borrower and the Subsidiaries as of and for the
fiscal quarter and the portion of ended on March 31, 1999, certified by its
chief financial officer. The consolidated financial statements referred to in
clauses (i) and (ii) above present fairly, in all material respects, the
financial position and results of operations and cash flows of the Borrower and
consolidated Subsidiaries as of such dates and for the indicated periods in
accordance with GAAP and are consistent with the books and records of the
Borrower (which books and records are correct and complete), subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.
(b) Since June 30, 1998, there has been no material adverse
change in the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and the Subsidiaries, taken as a whole.
Section 4.5 Properties
(a) Each of the Borrower and the Subsidiaries has good title
to, or valid leasehold interests in, all its real and personal property material
to its business, except for minor defects in title that do not interfere with
its ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
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(b) Each of the Borrower and the Subsidiaries owns, or is
entitled to use, all franchises, licenses, trademarks, tradenames, copyrights,
patents and other intellectual property material to its business, and the use
thereof by the Borrower and the Subsidiaries does not infringe upon the rights
of any other Person, except for any such infringements that, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
Section 4.6 Litigation and Environmental Matters
(a) There are no actions, suits or proceedings by or before
any arbitrator or Governmental Authority pending against or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or any of the
Subsidiaries (i) that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters) or (ii) that involve any Loan Document or the
Transactions.
(b) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Borrower nor any of the Subsidiaries (i) have failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) have become subject to
any Environmental Liability, (iii) have received notice of any claim with
respect to any Environmental Liability or (iv) know of any basis for any
Environmental Liability.
(c) Since the date of this Credit Agreement, there has been no
change in the status of the Disclosed Matters that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.
Section 4.7 Compliance with Laws and Agreements
Each of the Borrower and the Subsidiaries is in compliance
with all laws, regulations and orders of any Governmental Authority applicable
to it or its property and all indentures, agreements and other instruments
binding upon it or its property, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect. No Default has occurred and is continuing.
Section 4.8 Investment and Holding Company Status
Neither the Borrower nor any of the Subsidiaries are (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of
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1940 or (b) a "holding company" as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935.
Section 4.9 Taxes
Each of the Borrower and the Subsidiaries has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except
(a) Taxes that are being contested in good faith by appropriate proceedings and
for which the Borrower or such Subsidiary, as applicable, has set aside on its
books adequate reserves or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.
Section 4.10 ERISA
No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability
is reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect. The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed by more
than $1,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $1,000,000 the fair
market value of the assets of all such underfunded Plans.
Section 4.11 Disclosure
The Borrower has disclosed to the Credit Parties all
agreements, instruments and corporate or other restrictions to which it or any
of the Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower or any Subsidiary
to any Credit Party in connection with the negotiation of the Loan Documents or
delivered thereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided that, with
respect to projected financial information, the Borrower represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time.
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Section 4.12 Subsidiaries
Schedule 4.12 sets forth the name of, and the ownership
interest of the Borrower in, each Subsidiary on the Effective Date and
identifies each such Subsidiary as a Domestic Subsidiary, a Foreign Subsidiary,
Exempt Subsidiary and/or a Significant Subsidiary. As of the Effective Date, the
Subsidiaries executing the Guarantee Agreement (i) represent at least 75% of
Consolidated EBITDA and (ii) directly own at least 75% of Consolidated Total
Assets.
Section 4.13 Insurance
Schedule 4.13 sets forth a description of all insurance
maintained by or on behalf of the Borrower and the Subsidiaries as of the
Effective Date. As of the Effective Date, all premiums in respect of such
insurance that are due and payable have been paid.
Section 4.14 Labor Matters
As of the Effective Date, there are no strikes, lockouts or
slowdowns against the Borrower or any Subsidiary pending or, to the knowledge of
the Borrower, threatened. The hours worked by and payments made to employees of
the Borrower and the Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters, except where any such violations, individually and in
the aggregate, would not be reasonably likely to result in a Material Adverse
Effect. All material payments due from the Borrower or any Subsidiary, or for
which any claim may be made against the Borrower or any Subsidiary, on account
of wages and employee health and welfare insurance and other benefits, have been
paid or accrued as a liability on the books of the Borrower or such Subsidiary.
The consummation of the Transactions will not give rise to any right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Borrower or any Subsidiary is
bound.
Section 4.15 Solvency
Immediately following the making of each Loan, if any, and the
issuance of each Letter of Credit, if any, made or issued on the date thereof
and after giving effect to the application of the proceeds of such Loan and such
Letter of Credit, (a) the fair value of the assets of the Borrower and the
Subsidiaries, taken as a whole, at a fair valuation, will exceed their debts and
liabilities, subordinated, contingent or otherwise; (b) the present fair
saleable value of the property of the Borrower and the Subsidiaries, taken as a
whole, will be greater than the amount that will be required to pay the probable
liability of their debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured; (c)
each of the Borrower and the Subsidiary Guarantors will be able to pay its debts
and liabilities, subordinated,
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contingent or otherwise, as such debts and liabilities become absolute and
matured; and (d) each of the Borrower and the Subsidiary Guarantors will not
have unreasonably small capital with which to conduct the business in which it
is engaged as such business is now conducted and is proposed to be conducted
following such date.
Section 4.16 Federal Reserve Regulations
(a) Neither the Borrower nor any of the Subsidiaries are
engaged principally, or as one of their important activities, in the business of
extending credit for the purpose of buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase, acquire or carry any Margin Stock or for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the regulations of
the Board, including Regulation T, U or X.
Section 4.17 Year 2000
Any reprogramming required to permit the proper functioning,
in and following the year 2000, of (i) the Borrower's and the Subsidiaries'
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which the Borrower's or the
Subsidiaries' systems interact) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by September 30, 1999, except
where the failure to complete any such reprogramming could not reasonably be
expected to result in a Material Adverse Effect. The cost to the Borrower and
the Subsidiaries of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Borrower and the Subsidiaries
(including reprogramming errors and the failure of others' systems or equipment)
will not result in a Default or a Material Adverse Effect. Except for such of
the reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Borrower and the Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue for the
term of this Credit Agreement to be, sufficient to permit the Borrower and the
Subsidiaries to conduct their business without Material Adverse Effect.
ARTICLE 5. CONDITIONS
Section 5.1 Effective Date
The obligations of the Lenders to make Loans and of the
Issuing Bank to issue New Letters of Credit hereunder shall not become effective
until the date on which each of the following conditions is satisfied (or waived
in accordance with Section 10.2):
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(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this Credit
Agreement signed on behalf of such party or (ii) written evidence satisfactory
to the Administrative Agent (which may include telecopy transmission of a signed
signature page of this Credit Agreement) that such party has signed a
counterpart of this Credit Agreement.
(b) The Administrative Agent shall have received a promissory
note or notes for each Lender that has requested the same, signed on behalf of
the Borrower.
(c) The Administrative Agent shall have received a favorable
written opinion (addressed to the Credit Parties and dated the Effective Date)
from Kevin J. Dell, Esq., Senior Vice President, Secretary and General Counsel
of the Borrower and counsel to the Subsidiary Guarantors on behalf of the Loan
Parties, substantially in the form of Exhibit B, and covering such other matters
relating to the Loan Parties, the Loan Documents or the Transactions as the
Required Lenders shall reasonably request. The Borrower hereby requests such
counsel to deliver such opinion.
(d) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good standing of
each Loan Party, the authorization of the Transactions and any other legal
matters relating to the Loan Parties, the Loan Documents or the Transactions,
all in form and substance satisfactory to the Administrative Agent and its
counsel.
(e) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the President, a Vice
President or a Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 5.3.
(f) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder.
(g) The Administrative Agent shall have received counterparts
of the Guarantee Agreement signed on behalf of each Domestic Subsidiary (other
than an Exempt Subsidiary) which is a Significant Subsidiary or otherwise is
designated by the Borrower as a Subsidiary Guarantor together with a certificate
of a Financial Officer containing calculations in reasonable detail
demonstrating that the Borrower will be in compliance with Section 6.12 on the
Effective Date.
(h) The performance by each Loan Party of its obligations
under each Loan Document shall not (i) violate any applicable law, statute, rule
or regulation or
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(ii) conflict with, or result in a default or event of default under, any
material agreement of any Loan Party or any other Subsidiary, and the
Administrative Agent shall have received one or more legal opinions and/or
officer's certificates to such effect, satisfactory to the Agents.
(i) The Lenders shall be reasonably satisfied (i) that there
shall be no litigation or administrative proceeding, or regulatory development,
that would reasonably be expected to have a material adverse effect on (a) the
business, assets, operations, prospects, condition (financial or otherwise) or
material agreements of the Borrower and the Subsidiaries, taken as a whole, (b)
the ability of any Loan Party to perform any of its obligations under any Loan
Document or (c) the rights of or benefits available to any Credit Party under
any Loan Document and (ii) with the current status of, and the terms of any
settlement or other resolution of, any litigation or other proceedings brought
against the Borrower or any Subsidiary by or on behalf of its subscribers or by
any Governmental Authority relating to its business.
(j) After giving effect to the Transactions, none of the
Borrower or any of the Subsidiaries shall have outstanding any shares of
preferred equity securities or any Indebtedness, other than as permitted under
Section 7.1, and the Administrative Agent shall have received evidence that the
Prior Agreement has been terminated and all amounts due thereunder have been
paid.
(k) No material adverse change or material adverse condition
in the business, assets, operations, properties, condition (financial or
otherwise), liabilities (including contingent liabilities), prospects or
material agreements of the Borrower and the Subsidiaries, taken as a whole, has
occurred since June 30, 1998.
(l) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by a Financial Officer of the
Borrower, setting forth reasonably detailed calculations demonstrating
compliance with Sections 7.12, 7.13, 7.14 and 7.15 on a pro forma basis
immediately after giving effect to the Transactions to occur on the Effective
Date.
The Administrative Agent shall notify the Borrower and the Credit Parties of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and the Issuing Bank
to issue Letters of Credit hereunder shall not become effective unless each of
the foregoing conditions is satisfied (or waived pursuant to Section 9.2) at or
prior to 3:00 p.m., New York City time, on June 30, 1999 (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at
such time).
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Section 5.2 Conditions to Extensions of Credit in Connection with
Acquisitions Permitted under Section 7.4(l) of this Credit Agreement
In addition to the satisfaction on the Effective Date of the
conditions set forth in Section 5.1 and the satisfaction of the conditions set
forth in Section 5.3, the obligation of each Lender to make a Loan on the
occasion of any Borrowing and of the Issuing Bank to issue, amend, renew or
extend a Letter of Credit, in each case where the proceeds of which are to be
used directly or indirectly to make an acquisition permitted by Section 7.4(l)
is subject to the satisfaction of the following conditions precedent as of the
date of such Loan or such Letter of Credit:
(a) After giving effect to the making of such Loan or the
issuance of such Letter of Credit, the Leverage Ratio shall be less than
3.00:1.00, provided, that in computing the Leverage Ratio for purposes of this
subsection (a) only, Consolidated Adjusted EBITDA shall be determined on a pro
forma basis for the period of four consecutive quarters immediately succeeding
the date on which such acquisition is to be consummated.
(b) The Person to be acquired is engaged in substantially the
same or a related business as any Subsidiary of the Borrower, including the
software, financial services, transaction processing and outsourcing businesses,
or in the case of an acquisition of a business or assets, such business is
substantially the same as or related to, or such assets are devoted to a
business that is substantially the same as or related to, as the case may be,
the business of any Subsidiary of the Borrower.
(c) The Administrative Agent and the Lenders shall have
received historical financial statements of the Person or business to be
acquired for not less than three years to the date of such acquisition or such
lesser amount of time for which such statements exist.
(d) Financial Officer's Certificate. The Administrative Agent
shall have received a certificate (in form and substance satisfactory to the
Administrative Agent) of a Financial Officer to the effect that (and including
calculations in reasonable detail indicating that), on a pro forma basis after
giving effect to such acquisition, (i) all of the representations and warranties
in the Loan Documents will be true and correct, (ii) no Default shall have
occurred and be continuing, and (iii) certifying compliance with subsections (a)
and (b) of this Section 5.2 (including, with respect to subsection (a),
calculations in reasonable detail).
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Section 5.3 Each Credit Event
The obligation of each Lender to make a Loan on the occasion
of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend a
Letter of Credit, is subject to the satisfaction of the following conditions:
(a) The representations and warranties of the Borrower set
forth in this Credit Agreement shall be true and correct on and as of the date
of such Borrowing or the date of such issuance, amendment, renewal or extension,
as applicable.
(b) At the time of and immediately after giving effect to such
Borrowing or such issuance, amendment, renewal or extension, as applicable, no
Default shall have occurred and be continuing.
(c) The Administrative Agent shall have received such other
documentation and assurances as shall be reasonably required by it in connection
therewith.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE 6. AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees and other amounts payable under the
Loan Documents shall have been paid in full and all Letters of Credit have
expired and all LC Disbursements have been reimbursed, the Borrower covenants
and agrees with the Lenders that:
Section 6.1 Financial Statements and Other Information
The Borrower will furnish to the Administrative Agent (with a
copy thereof for each Lender, which shall be promptly delivered by the
Administrative Agent to such Lender):
(a) within 90 days after the end of each fiscal year, (i) its
Form 10-K containing its audited consolidated balance sheet and related
statements of income, stockholders' equity and cash flows as of the end of and
for such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on by Price WaterhouseCoopers or other
independent public accountants of recognized national standing (without a "going
concern" or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such
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consolidated financial statements present fairly in all material respects the
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, (i) its Form 10-Q containing its
consolidated balance sheet and related statements of income, stockholders'
equity and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, and (ii)
unaudited financial information for each of the Borrower's business lines, all
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the Borrower and
the consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
(c) concurrently with any delivery of financial statements
under clause (a) or (b) above, a certificate of a Financial Officer (i)
certifying as to whether a Default has occurred and, if a Default has occurred,
specifying the details thereof and any action taken or proposed to be taken with
respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.12, 7.12, 7.13, 7.14 and 7.15, (iii)
setting forth the name of each Domestic Subsidiary which is a Significant
Subsidiary and certifying that such Subsidiary is a Subsidiary Guarantor or an
Exempt Subsidiary, and (iv) stating whether any material change in GAAP or in
the application thereof in any material respect has occurred since the date of
the audited financial statements referred to in Section 4.4 and, if any such
change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate;
(d) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be; and
(e) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Borrower or any Subsidiary, or compliance with the terms of the Loan
Documents, as the Administrative Agent or any Lender may reasonably request.
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Section 6.2 Notices of Material Events
The Borrower will furnish to the Administrative Agent prompt
written notice of the following (with a copy thereof for each Lender, which
shall be promptly delivered by the Administrative Agent to such Lender):
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting the Borrower or any Affiliate thereof that, if adversely determined,
could in the good faith opinion of the Borrower reasonably be expected to result
in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and the Subsidiaries in an aggregate amount
exceeding $1,000,000;
(d) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect; and
(e) Each notice delivered under this Section shall be
accompanied by a statement of a Financial Officer or other executive officer of
the Borrower setting forth the details of the event or development requiring
such notice and any action taken or proposed to be taken with respect thereto.
Section 6.3 Existence; Conduct of Business
The Borrower will, and will cause each of the Subsidiaries to,
do or cause to be done all things necessary to preserve, renew and keep in full
force and effect its legal existence and the rights, licenses, permits,
privileges and franchises material to the conduct of its business, provided that
the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 7.3.
Section 6.4 Payment of Obligations
The Borrower will, and will cause each of the Subsidiaries to,
pay its obligations, including Tax liabilities, that, if not paid, could result
in a Material Adverse Effect before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has
set aside on its books adequate reserves with respect thereto in accordance with
GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.
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Section 6.5 Maintenance of Properties
The Borrower will, and will cause each of the Subsidiaries to,
keep and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted.
Section 6.6 Books and Records; Inspection Rights
The Borrower will, and will cause each of the Subsidiaries to,
keep proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of the Subsidiaries to,
permit any representatives designated by the Administrative Agent or any Lender,
upon reasonable prior notice, to visit and inspect its properties, to examine
and make extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants, all at
such reasonable times and as often as reasonably requested.
Section 6.7 Compliance with Laws
The Borrower will, and will cause each of the Subsidiaries to,
comply with all laws, rules, regulations and orders of any Governmental
Authority applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
Section 6.8 Use of Proceeds
(a) The proceeds of the Loans will be used only (i) to
refinance certain existing Indebtedness (ii) for working capital of the Borrower
and the Subsidiaries, (iii) to reimburse the Issuing Bank in respect of LC
Disbursements and (iv) to finance acquisitions permitted by Section 7.4(l).
Letters of Credit shall be issued only in support of the obligation of the
Borrower or a Subsidiary in favor of a beneficiary who has requested the
issuance of a letter of credit (x) as a condition to a transaction entered into
in the ordinary course of business, or (y) as support for Indebtedness permitted
by Section 7.1(a) incurred by the Borrower in connection with an acquisition
permitted by Section 7.4(l).
(b) No part of the proceeds of any Loan or any Letter of
Credit will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, to purchase, acquire or carry any Margin Stock or
for any purpose that entails a violation of any of the regulations of the Board,
including Regulations T, U and X.
Section 6.9 Insurance
The Borrower will, and will cause each of the Subsidiaries to,
maintain, with financially sound and reputable insurance companies, adequate
insurance for its
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insurable properties, all to such extent and against such risks, including fire,
casualty, business interruption and other risks insured against by extended
coverage, as is customary with companies in the same or similar businesses
operating in the same or similar locations.
Section 6.10 Additional Subsidiaries
If any Domestic Subsidiary (other than an Exempt Subsidiary)
is formed or acquired after the Effective Date and such Subsidiary is a
Significant Subsidiary or if any Domestic Subsidiary (other than an Exempt
Subsidiary) becomes a Significant Subsidiary, the Borrower will notify the
Administrative Agent in writing thereof within ten Business Days after the date
on which such Domestic Subsidiary is formed or acquired, becomes a Significant
Subsidiary or ceases to be an Exempt Subsidiary, as applicable, and the Borrower
will cause such Domestic Subsidiary to execute and deliver the Guarantee
Agreement (or otherwise become a party thereto in the manner provided therein)
within ten Business Days after the date on which such Subsidiary is formed or
acquired, becomes a Significant Subsidiary or ceases to be an Exempt Subsidiary,
as applicable, together with such certificates and legal opinions as the
Administrative Agent shall require.
Section 6.11 Environmental Compliance
The Borrower shall, and shall cause each of the Subsidiaries
to, use and operate all of its facilities and property in compliance with all
Environmental Laws, keep all necessary permits, approvals, certificates,
licenses and other authorizations relating to environmental matters in effect
and remain in compliance therewith, and handle all Hazardous Materials in
compliance with all applicable Environmental Laws, except where noncompliance
with any of the foregoing could not reasonably be expected to have a Material
Adverse Effect.
Section 6.12 Subsidiary Guarantors
The Borrower shall cause, as of the last day of any fiscal
quarter, the Obligations to be Guaranteed by Subsidiaries such that the
Obligations are Guaranteed by (i) Subsidiaries representing not less than 75% of
Consolidated EBITDA, and (ii) Subsidiaries representing not less than 75% of
Consolidated Total Assets and (iii) each Domestic Subsidiary (other than an
Exempt Subsidiary) which is a Significant Subsidiary. Notwithstanding the
provisions of this Section 6.12, the Borrower shall not be deemed to have
violated the requirements of this Section 6.12 set forth above if any violation
thereof is cured within 90 days from the last day of such fiscal quarter such
that one or more of the Subsidiaries which were not Subsidiary Guarantors as of
the last day of such fiscal quarter become Subsidiary Guarantors during such 90
day period in the manner provided by Section 6.10 and if the foregoing tests
would have been satisfied as
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of the last day of such fiscal quarter had such Subsidiaries been Subsidiary
Guarantors on such day.
Section 6.13 Year 2000 Compliance
The Borrower shall do or cause to be done all things necessary
(i) to comply with the provisions of Section 4.17 and (ii) to test all of its
and the Subsidiaries' systems and equipment supplied by others or with which its
or any Subsidiary's systems interface on or before September 30, 1999, except
where the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
ARTICLE 7. NEGATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees and other amounts payable under the
Loan Documents shall have been paid in full and all Letters of Credit have
expired and all LC Disbursements have been reimbursed, the Borrower covenants
and agrees with the Lenders that:
Section 7.1 Indebtedness
(a) The Borrower will not, and will not permit any Subsidiary
to, create, incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) (A) Indebtedness existing on the date hereof and
set forth in Schedule 7.1, including, except as set forth in the
proviso below, refinancings thereof but not increases in the amount of
any thereof, provided that refinancings of such existing Indebtedness
shall not be permitted unless the interest rate on any such refinanced
Indebtedness is not in excess of the rate available for similar
borrowings by similar borrowers at the time of the refinancing, the
final maturity of such refinanced Indebtedness is not earlier than the
Maturity Date, and if the Indebtedness being refinanced is subordinated
to the Indebtedness under the Loan Documents, such refinanced
Indebtedness shall be so subordinated on the same terms and to the same
extent as such Indebtedness being so refinanced and (B) Indebtedness
under the Prior Agreement and all agreements, instruments and other
documents executed or delivered in connection therewith, provided that
such Indebtedness is fully repaid on or before the Effective Date;
(iii) Indebtedness of the Borrower or any Subsidiary
incurred to finance the acquisition, construction or improvement of any
fixed or
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capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such
assets or secured by a Lien on any such assets prior to the acquisition
thereof, and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof, provided that (A) such Indebtedness is incurred prior to or
within 90 days after such acquisition or the completion of such
construction or improvement and (B) the aggregate principal amount of
Indebtedness permitted by this clause (iii) shall not exceed $5,000,000
at any time outstanding;
(iv) Indebtedness of any Person that becomes a
Subsidiary after the date hereof or which is otherwise incurred in
connection with an acquisition permitted by Section 7.4(l), provided
that (A) such Indebtedness exists at the time such Person becomes a
Subsidiary or such acquisition, as applicable, and is not created in
contemplation of or in connection with such Person becoming a
Subsidiary, or such acquisition, as applicable, and (B) the aggregate
principal amount of Indebtedness permitted by this clause (iv) shall
not exceed $10,000,000 at any time outstanding;
(v) Indebtedness of (A) the Borrower to any Domestic
Subsidiary and of any Domestic Subsidiary to the Borrower or any other
Domestic Subsidiary and (B) to the extent permitted by Section 7.4(d),
the Borrower to any Foreign Subsidiary and of any Foreign Subsidiary to
the Borrower or any other Foreign Subsidiary or Domestic Subsidiary;
(vi) Guarantees by (A) the Borrower of Indebtedness
of any Domestic Subsidiary and by any Domestic Subsidiary of
Indebtedness of the Borrower or any other Domestic Subsidiary and (B)
any Foreign Subsidiary of Indebtedness of the Borrower and by any
Foreign Subsidiary of Indebtedness of any other Foreign Subsidiary or
Domestic Subsidiary;
(vii) Indebtedness of the Borrower incurred in
connection with an acquisition permitted by Section 7.4(l), provided
that (A) such Indebtedness is subordinated to the Indebtedness under
the Loan Documents on terms and in form and substance satisfactory to
the Administrative Agent and Required Lenders and (B) at the time of
the incurrence thereof and immediately after giving effect thereto, no
Default shall have occurred and be continuing;
(viii) Acquisition Related Contingent Payments
incurred after the Effective Date with respect to acquisitions
permitted by Section 7.4(l), which, at the time of the incurrence
thereof, are commercially reasonable under the circumstances;
(ix) Indebtedness of the Borrower under performance
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Guarantees of the obligations of the Subsidiaries, provided that (A)
such Guarantee is required as a condition of a Person retaining the
services of a Subsidiary of the Borrower, (B) the obligations which are
Guaranteed are not financial obligations (other than financial
obligations incurred in the ordinary course of business), and (C) to
the extent that any such obligations are financial obligations, (1)
such obligations are not in excess of $10,000,000 in the aggregate or
(2) the Guarantee in respect of such obligations is in a form to be
negotiated that is mutually satisfactory to the Administrative Agent
and the Borrower;
(x) Indebtedness of the Borrower in respect of
operating or capital leases of one or more of the Subsidiaries provided
that in the case of Guarantees in respect of Capital Lease Obligations,
such Capital Lease Obligations are permitted to be incurred pursuant to
clause (iii) above;
(xi) Indebtedness of a Subsidiary of the Borrower in
respect of Compensation Financings, provided that (A) at the time of
the incurrence thereof and immediately after giving effect thereto, no
Default shall have occurred and be continuing, and (B) such
Indebtedness shall be unsecured or, if secured, shall be secured only
by the 12b-1 Fees and/or Contingent Deferred Sales Commissions to which
such Subsidiary is entitled from the Investment Company or its
shareholders which is the subject of such Compensation Financings;
(xii) in addition to Indebtedness permitted under
clause (iii) above, Capital Lease Obligations in connection with sale
and leaseback transactions to the extent permitted by Section 7.6; and
(xiii) Indebtedness in respect of publicly issued
Permitted Notes in an aggregate amount not in excess of $100,000,000,
provided that at the time of the incurrence thereof and immediately
after giving effect thereto, (A) no Default shall have occurred and be
continuing and (B) the Leverage Ratio shall be less than 3.00:1.00;
(xiv) Indebtedness of the Borrower or any of the
Subsidiaries incurred in connection with a sale of receivables in
respect of 12b-1 Fees and Contingent Deferred Sales Commissions,
provided that at the time of the incurrence thereof and immediately
after giving effect thereto, no Default shall have occurred and be
continuing;
(xv) Indebtedness of the Borrower or any of the
Subsidiaries incurred in connection with a sale of receivables (other
than receivables described in clause (xiv) above) in a Securitization
transaction permitted by Section 7.5(e)(ii), provided that (A) at the
time of the incurrence
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thereof and immediately after giving effect thereto, no Default shall
have occurred and be continuing, and (B) the creditor in respect of
such Indebtedness shall have no recourse to the Borrower or such
Subsidiary but may have recourse only to such receivables (including
the right to require the Borrower or such Subsidiary to repurchase such
receivables); and
(xvi) other unsecured Indebtedness of the Borrower;
provided that (A) such Indebtedness is subordinated to the Indebtedness
under the Loan Documents on terms and in form and substance
satisfactory to the Administrative Agent and Required Lenders and (B)
at the time of the incurrence thereof and immediately after giving
effect thereto, no Default shall have occurred and be continuing.
(b) The Borrower will not, and it will not permit any
Subsidiary to, (i) issue any equity securities which are of a class or series
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable at the option of the holder thereof by contract or
otherwise, is, or upon the happening of an event or passage of time would be,
required to be redeemed prior to the Maturity Date or is redeemable at the
option of the holder thereof at any time on or prior to the Maturity Date, or is
convertible into or exchangeable at the option of the holder thereof for debt
securities at any time prior to the Maturity Date (as from time to time
extended), or (ii) be or become liable in respect of any obligation (contingent
or otherwise) to purchase, redeem, retire, acquire or make any other payment in
respect of any shares of equity securities of the Borrower or any Subsidiary or
any option, warrant or other right to acquire any such shares of equity
securities, except as permitted under Section 7.8.
Section 7.2 Liens
The Borrower will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Lien on any property or asset now
owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 7.2, provided
that (i) such Lien shall not apply to any other property or asset of the
Borrower or any Subsidiary and (ii) such Lien shall secure only those
obligations which it secures on the date hereof and any extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;
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(d) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date hereof
prior to the time such Person becomes a Subsidiary, provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition or
such Person becoming a Subsidiary, as applicable, (ii) such Lien shall not apply
to any other property or assets of the Borrower or any Subsidiary and (iii) such
Lien shall secure only those obligations that it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as applicable, and any
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(e) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary, provided that (i) such security
interests secure Indebtedness permitted by clause (iii) of Section 7.1, (ii)
such security interests and the Indebtedness secured thereby are incurred prior
to or within 90 days after such acquisition or the completion of such
construction or improvement, (iii) the Indebtedness secured thereby does not
exceed the cost of acquiring, constructing or improving such fixed or capital
assets and (iv) such security interests shall not apply to any other property or
assets of the Borrower or any Subsidiary; and
(f) Liens on receivables (i) in respect of 12b-1 Fees and
Contingent Deferred Sales Commissions to secure Indebtedness permitted by
Section 7.1(a)(xiv) and (ii) sold in a Securitization transaction permitted by
Section 7.5(e) to secure Indebtedness permitted by Section 7.1(a)(xv).
Section 7.3 Fundamental Changes
(a) The Borrower will not, and will not permit any Subsidiary
to, merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or
substantially all of its assets, or all or substantially all of the equity
securities of any of the Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto, no Default shall have
occurred and be continuing:
(i) any Subsidiary may merge into the Borrower in a
transaction in which the Borrower is the surviving entity, any
Subsidiary may merge into any Subsidiary Guarantor in a transaction in
which such Subsidiary Guarantor is the surviving entity;
(ii) any Subsidiary may merge with any Person in a
transaction that is not permitted by clause (i) of this Section 7.3(a),
provided that such merger is permitted by Section 7.4 or 7.5, as
applicable;
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(iii) any Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Borrower or to any Subsidiary
Guarantor;
(iv) the Borrower or any Subsidiary may sell,
transfer, lease or otherwise dispose of its assets in a transaction
that is not permitted by clause (iii) of this Section 7.3(a), provided
that such sale, transfer, lease or other disposition is also permitted
by Section 7.5.
(b) The Borrower will not, and will not permit any of the
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and the Subsidiaries on the
date of execution of this Credit Agreement and businesses directly related
thereto.
Section 7.4 Investments, Loans, Advances, Guarantees and Acquisitions
The Borrower will not, and will not permit any of the
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger)
any capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of transactions
(including pursuant to any merger)) any assets of any other Person constituting
a business unit, except:
(a) Permitted Investments;
(b) investments existing on the date hereof and set forth in
Schedule 7.4;
(c) investments made (i) by the Borrower in the equity
securities of any wholly-owned Domestic Subsidiary, (ii) by any wholly-owned
Domestic Subsidiary in the equity securities of any other wholly-owned Domestic
Subsidiary and (iii) by any wholly-owned Foreign Subsidiary in the equity
securities of any other wholly-owned Subsidiary;
(d) loans or advances made (i) by the Borrower to any
wholly-owned Domestic Subsidiary, (ii) by any wholly-owned Domestic Subsidiary
to the Borrower or any wholly-owned Domestic Subsidiary, and (iii) by the
Borrower or any Subsidiary Guarantor to any Foreign Subsidiary; provided that
(A) such loans or advances shall be repayable on demand, (B) at the time thereof
and immediately after giving effect thereto no Default shall have occurred and
be continuing, (C) the outstanding principal amount of loans and advances
described in clause (iii) shall not exceed $20,000,000 outstanding at any time,
(D) at such time as the aggregate amount of loans and advances described in
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clause (iii) shall exceed $10,000,000, demand promissory notes evidencing all
loans and advances described in clause (iii) shall be pledged as collateral to
the Administrative Agent pursuant to documentation in form and substance
satisfactory to the Administrative Agent and (E) the Borrower shall not permit
any Subsidiary that is an Investment Company within the meaning of the 1940 Act
or a Person deemed to be an "investment company" to incur Indebtedness described
in this subsection (d) as a result of the Borrower or any other Subsidiary
making an investment in such Subsidiary with the proceeds of Loans or Letters of
Credit;
(e) acquisitions made by the Borrower from any Domestic
Subsidiary and made by any Domestic Subsidiary from the Borrower or any other
Domestic Subsidiary;
(f) investments consisting of loans to employees of the
Borrower or any of the Subsidiaries made in the ordinary course of business,
provided that at the time of such loans and immediately after giving effect
thereto no Default shall have occurred and be continuing;
(g) investments consisting of minority interests in
substantially the same or a related business to that of the Borrower or any of
the Subsidiaries in an aggregate amount not to exceed $10,000,000, provided that
at the time thereof and immediately after giving effect thereto no Default shall
have occurred and be continuing;
(h) investments in shares of an Investment Company for which a
Subsidiary is a principal underwriter named in such Investment Company's
registration statement under the 1940 Act, provided that (i) such shares are
acquired by such Subsidiary prior to the public offering of such Investment
Company's shares, (ii) such shares are acquired by such Subsidiary solely for
purposes of enabling such Investment Company to satisfy the net worth
requirement of Section 14(a)(1) of the 1940 Act, and (iii) the amount paid for
such shares is limited to the amount necessary to enable such Investment Company
to satisfy the net worth requirement of Section 14(a)(1) of the 1940 Act plus an
additional $10,000,000 in the aggregate for all such investments, it being
understood that nothing herein shall require the sale of any such shares;
(i) investments in shares of open-end management Investment
Companies, provided that after giving effect to any such investment, the
consideration paid for such shares, when aggregated with the consideration paid
for all other such shares then held by the Borrower and the Subsidiaries, shall
not exceed 10% of the value of Consolidated Total Assets as at such time of such
investment;
(j) in addition to investments permitted by subsection (c)
above, capital contributions by the Borrower or any Subsidiary thereof to Exempt
Subsidiaries (other than a Subsidiary of the Borrower that is an Exempt
Subsidiary solely because of
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the applicability of clause (iii) of the definition of "Exempt Subsidiary"),
provided that (i) at the time thereof and immediately after giving effect
thereto no Default shall have occurred and be continuing, and (ii) the amount of
any such investment shall not exceed the amount necessary to meet the net
capital requirements applicable to such Exempt Subsidiaries;
(k) acquisitions by the Borrower or any Subsidiary of rights
under a contract or group of related contracts with a customer that had
previously been a party to a similar contract or group of contracts with another
Person with respect to which the Borrower or such Subsidiary has agreed to pay a
fee to such Person upon the successful negotiation, execution and delivery of a
replacement contract or group of contracts with such customer within a specified
period of time provided, that (i) at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be continuing, (ii) the
Leverage Ratio on a pro forma basis for the period of four consecutive quarters
immediately succeeding the date on which such rights are acquired is less than
3.00:1.00 and (iii) the Administrative Agent and the Lenders shall have received
a certificate (in form and substance satisfactory to the Administrative Agent)
of a Financial Officer of the Borrower to the foregoing effect, setting forth
calculations in reasonable detail; and
(l) in addition to the acquisition of rights described in
subsection (g) above, other investments, loans, advances, Guarantees and
acquisitions, provided that (i) at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing and (ii) in the
case of an acquisition financed in whole or in part with the proceeds of Loans,
the conditions set forth in Section 5.2 shall have been satisfied.
Section 7.5 Asset Sales
The Borrower will not, and will not permit any of the
Subsidiaries to, sell, transfer, lease or otherwise dispose (including pursuant
to a merger) of any asset, including any equity securities, nor will the
Borrower permit any of the Subsidiaries to issue any additional shares of its
equity securities, except:
(a) sales, transfers, leases and other dispositions of
inventory, used or surplus equipment and Permitted Investments, in each case in
the ordinary course of business;
(b) sales, transfers, leases and other dispositions made by
the Borrower to any Domestic Subsidiary and made by any Domestic Subsidiary to
the Borrower or any other Domestic Subsidiary;
(c) if at the time thereof and immediately after giving effect
thereto no Default shall have occurred and be continuing, other sales,
transfers, leases and other
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dispositions of assets, provided that (i) the assets sold, transferred, leased
or otherwise disposed of shall have (x) contributed less than 15% of
Consolidated EBITDA during the immediately preceding four fiscal quarters and
(y) represent less than 15% of Consolidated Total Assets as of the most recently
completed fiscal quarter, (ii) the aggregate fair market value of all assets,
sold, transferred, leased or otherwise disposed of in reliance upon this
subsection (d) shall not exceed 15% of Consolidated Total Assets as of the most
recently completed fiscal quarter, and (iii) all sales, transfers, leases and
other dispositions permitted by this subsection (d) shall be made for fair value
and solely for cash consideration;
(d) sales in respect of sale and leaseback transactions to the
extent permitted by Section 7.6; and
(e) if at the time thereof and immediately after giving effect
thereto no Default shall have occurred and be continuing, (i) sales of
receivables in respect of 12b-1 Fees and Contingent Deferred Sales Commissions,
provided that any Indebtedness incurred in connection with such receivables
shall be permitted by Section 7.1(a)(xiv) and (ii) sales of receivables (other
than receivables described in clause (i) above) in connection with a
Securitization thereof, provided that (x) any Indebtedness incurred in
connection with such receivables shall be permitted by Section 7.1(a)(xv) and
(y) the amount of such receivables sold in any period of 12 consecutive months
shall not exceed $100,000,000.
Section 7.6 Sale and Lease-Back Transactions
The Borrower will not, and will not permit any of the
Subsidiaries to, enter into any arrangement, directly or indirectly, with any
Person whereby it shall sell or transfer any property, real or personal, used or
useful in its business, whether now owned or hereafter acquired, and thereafter
rent or lease such property or other property that it intends to use for
substantially the same purpose or purposes as the property being sold or
transferred if the aggregate amount of rental payments to be made in connection
with all such transactions would exceed $10,000,000 in the aggregate.
Section 7.7 Hedging Agreements
The Borrower will not, and will not permit any of the
Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements
entered into in the ordinary course of business (including those entered into
specifically in connection with one or more underlying business transactions) to
hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in
the conduct of its business or the management of its liabilities.
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Section 7.8 Restricted Payments
The Borrower will not, and will not permit any of the
Subsidiaries to, declare or make, or agree to pay for or make, directly or
indirectly, any Restricted Payment, except that:
(a) the Borrower may declare and pay dividends with
respect to its equity securities payable solely in additional shares of
its equity securities;
(b) any wholly-owned Subsidiary may declare and pay
dividends with respect to its equity securities to the Borrower or any
other Subsidiary; and
(c) if at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be continuing,
(i) the Borrower may repurchase shares of its capital stock (including
repurchases in connection with the exercise of options granted to an
employee of the Borrower or any of its Subsidiaries under any stock
option or employee stock purchase plan of the Borrower); provided that
such shares are used as consideration for an acquisition permitted by
Section 7.4(l) within one hundred and twenty (120) days of such
repurchase; and (ii) the Borrower may repurchase shares of its capital
stock, not subject to or included in the limitation in subsection (i)
of this subsection (c), in an aggregate amount not in excess of
$30,000,000 in any fiscal year on a non-cumulative basis, provided
further that if the Borrower receives any amounts in cash during such
fiscal year as the result of the exercise of any option granted to an
employee of the Borrower or any of its Subsidiaries under any stock
option or employee stock purchase plan of the Borrower, the portion of
the foregoing $30,000,000 limitation utilized during such fiscal year
shall be reduced by the amounts so received.
Section 7.9 Transactions with Affiliates
The Borrower will not, and will not permit any of the
Subsidiaries to, sell, transfer, lease or otherwise dispose (including pursuant
to a merger) any property or assets to, or purchase, lease or otherwise acquire
(including pursuant to a merger) any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except in the
ordinary course of business at prices and on terms and conditions not less
favorable to the Borrower or such Subsidiary than could be obtained on an
arms-length basis from unrelated third parties, provided that this Section shall
not apply to any transaction that is permitted under Section 7.1, 7.3, 7.4, 7.5
or 7.8, between or among the Loan Parties and not involving any other Affiliate.
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Section 7.10 Restrictive Agreements
The Borrower will not, and will not permit any of the
Subsidiaries to, directly or indirectly, enter into, incur or permit to exist
any agreement or other arrangement that prohibits, restricts or imposes any
condition upon (a) the ability of the Borrower or any Subsidiary to create,
incur or permit to exist any Lien upon any of its property or assets or (b) the
ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its equity securities or to make or repay loans or advances to
the Borrower or any other Subsidiary or to Guarantee Indebtedness of the
Borrower or any other Subsidiary, provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by this Credit Agreement,
(ii) the foregoing shall not apply to restrictions and conditions existing on
the date hereof identified on Schedule 7.10 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided that such restrictions and conditions
apply only to the Subsidiary that is to be sold and such sale is permitted
hereunder, (iv) clause (a) of this Section shall not apply to restrictions or
conditions imposed by any agreement relating to secured Indebtedness permitted
by this Credit Agreement if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and (v) clause (a) of this Section
shall not apply to customary provisions in leases restricting the assignment
thereof.
Section 7.11 Amendment of Material Documents
The Borrower will not, and will not permit any Subsidiary to,
amend or modify its certificate of incorporation, by-laws or other
organizational documents, other than immaterial amendments, modifications or
waivers that would not reasonably be expected to adversely affect the Credit
Parties.
Section 7.12 Fixed Charge Coverage Ratio
The Borrower will not permit the Fixed Charge Coverage Ratio
at any time (to be tested as of the last day of each fiscal quarter) to be less
than 2.00:1.00.
Section 7.13 Leverage Ratio
The Borrower will not permit the Leverage Ratio to be greater
than 3:50:1.00 at any time.
Section 7.14 Consolidated Net Worth
The Borrower will not permit Consolidated Net Worth as of the
last day of each fiscal quarter to be less than the sum, without duplication, of
(i) $185,000,000, plus
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(ii) 60% of Consolidated Net Income (if positive) for each fiscal quarter
commencing after June 30, 1998 to the date of such determination, plus (iii)
with respect to any issuance of its capital stock (other than treasury stock)
after the Effective Date, (A) in the case of any such issuance in connection
with an acquisition, 90% of the total increase in its stockholder's equity as a
result of such acquisition and (B) in all other cases, 90% of the total net
proceeds received by it from such issuance.
Section 7.15 Ratio of Funded Indebtedness to Capitalization
The Borrower will not at any time during the periods set forth
below permit the ratio of (i) funded Indebtedness of the Borrower and the
Subsidiaries (determined on a consolidated basis in accordance with GAAP) to
(ii) the sum of (x) Consolidated Net Worth plus (y) funded Indebtedness of the
Borrower and the Subsidiaries (determined on a consolidated basis in accordance
with GAAP):
<TABLE>
<CAPTION>
Period Ratio
------------------------------------------------------------- ----------------
<S> <C>
Effective Date through June 30, 2002 0.45:1.00
July 1, 2002 and thereafter 0.40:1.00
</TABLE>
ARTICLE 8. EVENTS OF DEFAULT
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan
or any reimbursement obligations in respect of any LC Disbursement when and as
the same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or
on any reimbursement obligation in respect of any LC Disbursement or any fee,
commission or any other amount (other than an amount referred to in clause (a)
of this Article) payable under any Loan Document, when and as the same shall
become due and payable, and such failure shall continue unremedied for a period
of three Business Days;
(c) any representation or warranty made or deemed made by or
on behalf of any Loan Party or any other Subsidiary in or in connection with any
Loan Document or any amendment or modification hereof or waiver thereunder, or
in any report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment or
modification hereof or waiver thereunder, shall prove to have been incorrect
when made or deemed made;
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<PAGE> 78
(d) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 6.2, 6.3, 6.8, 6.10, 6.12
or in Article 7, or any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any other Loan Document;
(e) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document to which it is a
party (other than those specified in clause (a), (b) or (d) of this Article),
and such failure shall continue unremedied for a period of 30 days after a
Responsible Officer of such Loan Party shall have obtained knowledge thereof;
(f) the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable
(after giving effect to any applicable grace period);
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity (in each case after giving effect to any applicable grace period),
provided that this clause (g) shall not apply to secured Indebtedness that
becomes due solely as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Borrower, any Significant Subsidiary or any other
Loan Party or its debts, or of a substantial part of its assets, under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower, any
Significant Subsidiary or any other Loan Party or for a substantial part of its
assets, and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(i) the Borrower, any Significant Subsidiary or any other Loan
Party shall (i) voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower, any
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<PAGE> 79
Significant Subsidiary or any other Loan Party or for a substantial part of its
assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing;
(j) the Borrower, any Significant Subsidiary or any other Loan
Party shall become unable, admit in writing its inability or fail generally to
pay its debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $5,000,000 shall be rendered against the Borrower
or any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any Subsidiary to
enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse Effect;
(m) any Loan Document shall cease, for any reason, to be in
full force and effect, or any Loan Party shall so assert in writing or shall
disavow any of its obligations thereunder; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event described in clause (h) or
(i) of this Article), and at any time thereafter during the continuance of such
event, the Administrative Agent may, and at the request of the Required Lenders
shall, by notice to the Borrower, take either or both of the following actions,
at the same or different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of each Loan Party accrued under the Loan Documents, shall become
due and payable immediately, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; and in case
of any event described in clause (h) or (i) of this Article, the Commitments
shall automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of
each Loan Party accrued under the Loan Documents, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
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ARTICLE 9. THE ADMINISTRATIVE AGENT
Each Credit Party hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
The Person serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not the Administrative Agent, and
such Person and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing by the Required
Lenders (or such other number or percentage of the Credit Parties as shall be
necessary under the circumstances as provided in Section 10.2), and (c) except
as expressly set forth herein, the Administrative Agent shall not have any duty
to disclose, and shall not be liable for the failure to disclose, any
information relating to the Borrower, any of the Subsidiaries or any other Loan
Party that is communicated to or obtained by the Person serving as
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Credit Parties as shall be necessary under the
circumstances as provided in Section 10.2) or in the absence of its own gross
negligence or willful misconduct. The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Credit Party (and,
promptly after its receipt of any such notice, it shall give each Credit Party
and the Borrower notice thereof), and the Administrative Agent shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with any Loan Document, (ii)
the contents of any certificate, report or other document delivered thereunder
or in connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth therein, (iv) the
validity, enforceability, effectiveness or genuineness thereof or any other
agreement, instrument or other document or (v) the satisfaction of any condition
set forth in Article 5 or elsewhere herein, other than to confirm receipt of
items expressly required to be delivered to the Administrative Agent.
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The Administrative Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The Administrative Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent, provided that no such delegation shall
serve as a release of the Administrative Agent or waiver by the Borrower of any
rights hereunder. The Administrative Agent and any such sub-agent may perform
any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Credit Parties and the Borrower. Upon any
such resignation, the Required Lenders shall have the right, in consultation
with the Borrower, to appoint a successor. If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on behalf of the Credit
Parties, appoint a successor Administrative Agent which shall be a commercial
bank with an office in New York, New York and having a combined capital, surplus
and undivided profits of at least $100,000,000. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the Borrower
and such successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 10.3 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.
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Each Credit Party acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Credit Party and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Credit Agreement. Each
Credit Party also acknowledges that it will, independently and without reliance
upon the Administrative Agent or any other Credit Party and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon any Loan Document, any related agreement or any document furnished
thereunder.
Notwithstanding anything in any Loan Document to the contrary,
no co-agent hereunder shall have any duty or obligation under the Loan Documents
in such capacity.
ARTICLE 10. MISCELLANEOUS
Section 10.1 Notices
Except in the case of notices and other communications
expressly permitted to be given by telephone, all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:
(a) if to the Borrower, to it at The BISYS Group, Inc., 150
Clove Road, Little Falls, New Jersey 07424, Attention of the Chief Financial
Officer thereof (Telephone No. (201) 812-8610; Telecopy No. (201) 812-1217);
with a copy to The BISYS Group, Inc., 150 Clove Road, Little Falls, New Jersey
07424, Attention of the General Counsel thereof; Telephone No. (201) 812-8607;
Telecopy No. (201) 812-1217;
(b) if to the Administrative Agent, or BNY as Issuing Bank to
it at One Wall Street, New York, New York 10286, Attention of: Pina Impeduglia
(Telephone No. (212) 635-4696; Telecopy No. (212) 635-6365 or 6366 or 6367);
with a copy to The Bank of New York, at 385 Rifle Camp Road, West Paterson, NJ
07424, Attention of: Steven L. Wexler (Telephone No. (973) 357-7756; Telecopy
No. (973) 357-7705); and
(c) if to any other Credit Party, to it at its address (or
telecopy number) set forth in Schedule 2.1, in the case of each Credit Party
originally named herein, or the Assignment and Acceptance pursuant to which such
Credit Party became a party hereto, in all other cases.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other
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communications given to any party hereto in accordance with the provisions
of this Credit Agreement shall be deemed to have been given on the date of
receipt.
Section 10.2 Waivers; Amendments
(a) No failure or delay by any Credit Party in exercising any
right or power under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Credit Parties under the Loan
Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of any Loan Document or
consent to any departure by any Loan Party therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or the issuance, amendment, extension or renewal
of a Letter of Credit shall not be construed as a waiver of any Default,
regardless of whether any Credit Party may have had notice or knowledge of such
Default at the time.
(b) Neither this Credit Agreement nor any provision hereof may
be waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders or by the Borrower
and the Administrative Agent with the consent of the Required Lenders, provided
that no such agreement shall (i) increase the Commitment of any Lender without
the written consent of such Lender, (ii) reduce the principal amount of any Loan
or any LC Disbursement, or reduce the rate of interest thereon, or reduce any
fees or other amounts payable under the Loan Documents, or reduce the amount of
any scheduled reduction of any Commitment, without the written consent of each
Credit Party affected thereby, (iii) postpone the scheduled date of payment of
the principal amount of any Loan or any LC Disbursement, or any interest
thereon, or any fees or other amounts payable under the Loan Documents, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of reduction or expiration of any Commitment, without the written
consent of each Credit Party affected thereby, (iv) change any provision hereof
in a manner that would alter the pro rata sharing of payments required by any
Loan Document, without the written consent of each Credit Party, (v) change any
of the provisions of this Section or the definition of "Required Lenders" or any
other provision hereof specifying the number or percentage of Lenders required
to waive, amend or modify any rights hereunder or make any determination or
grant any consent hereunder, or change the several nature of the obligations of
the Lenders hereunder, without the written consent of each Lender, (vi) release
the Parent or any Subsidiary Guarantor from its Guarantee under the Guarantee
Agreement (except as expressly provided in the Guarantee Agreement or as a
result of the termination of the existence of such Subsidiary Guarantor in a
transaction
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permitted by Section 7.3), or limit its liability in respect of such Guarantee,
without the written consent of each Lender, or (vii) increase the Swingline
Commitment, without the written consent of each Lender, and provided, further,
that no such agreement shall amend, modify or otherwise affect the rights or
duties of the Administrative Agent, the Issuing Bank or the Swingline Lender
hereunder without the prior written consent of the Administrative Agent, the
Issuing Bank or the Swingline Lender, as the case may be.
Section 10.3 Expenses; Indemnity; Damage Waiver
(a) The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Credit Agreement or any
amendments, modifications or waivers of the provisions of any Loan Document
(whether or not the transactions contemplated thereby shall be consummated),
(ii) all out-of-pocket expenses incurred by the Issuing Bank in connection with
the issuance, amendment, renewal or extension of any Letter of Credit or any
demand for payment thereunder and (iii) all out-of-pocket expenses incurred by
any Credit Party, including the fees, charges and disbursements of any counsel
for any Credit Party, in connection with the enforcement or protection of its
rights in connection with the Loan Documents, including its rights under this
Section, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.
(b) The Borrower shall indemnify each Credit Party and each
Related Party thereof (each such Person being called an "Indemnitee") against,
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties to the Loan Documents of
their respective obligations thereunder or the consummation of the Transactions
or any other transactions contemplated thereby, (ii) any Loan or Letter of
Credit or the use of the proceeds thereof including any refusal of the Issuing
Bank to honor a demand for payment under a Letter of Credit if the documents
presented in connection with such demand do not strictly comply with the terms
of such Letter of Credit, (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by the Borrower or
any of the Subsidiaries, or any Environmental Liability related in any way to
the Borrower or any of the Subsidiaries or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto, provided that such indemnity shall not, as to
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any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent or the Issuing Bank under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or the Issuing Bank, as applicable, such Lender's
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount,
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as applicable, was incurred by or asserted against
the Administrative Agent or the Issuing Bank in its capacity as such.
(d) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, any Loan Document or any agreement, instrument or other document
contemplated thereby, the Transactions or any Loan or any Letter of Credit or
the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable
promptly but in no event later than 30 days after written demand therefor.
Section 10.4 Successors and Assigns
(a) The provisions of this Credit Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that the Borrower may not assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of each Credit Party (and any attempted assignment or
transfer by the Borrower without such consent shall be null and void). Nothing
in this Credit Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby and, to the extent expressly contemplated hereby, the
Related Parties of each Credit Party) any legal or equitable right, remedy or
claim under or by reason of any Loan Document.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Credit Agreement (including all
or a portion of its Commitment and the Loans at the time owing to it), provided
that (i) except in the case of an assignment to a Lender or an Affiliate or an
Approved Fund of a Lender, each of the Borrower and the Administrative Agent
(and, in the case of an assignment of all or any portion of the assigning
Lender's Commitment or obligations in respect of its LC
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<PAGE> 86
Exposure or Swingline Exposure, the Issuing Bank and/or the Swingline Lender, as
the case may be) must give its prior written consent to such assignment (which
consent shall not be unreasonably withheld), (ii) except in the case of an
assignment to a Lender or an Affiliate or an Approved Fund of a Lender or an
assignment of the entire remaining amount of the assigning Lender's Commitment,
the amount of the Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $10,000,000 unless the Borrower and the Administrative Agent otherwise
consent, (iii) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with, unless
otherwise agreed by the Administrative Agent, a processing and recordation fee
of $3,500, and (iv) the assignee, if it shall not be a Lender, shall deliver to
the Administrative Agent an Administrative Questionnaire, and provided, further,
that any consent of the Borrower otherwise required under this paragraph shall
not be required if a Default has occurred and is continuing. Subject to
acceptance and recording thereof pursuant to paragraph (d) of this Section, from
and after the effective date specified in each Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under the Loan Documents, and the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under the Loan Documents (and, in the case of an
Assignment and Acceptance covering all of the assigning Lender's rights and
obligations under the Loan Documents, such Lender shall cease to be a party
hereto but shall continue to be entitled to the benefits of Sections 3.5, 3.6,
3.7 and 10.3). Any assignment or transfer by a Lender of rights or obligations
under the Loan Documents that does not comply with this paragraph shall be
treated for purposes of the Loan Documents as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices in New York City a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Revolving Loans and LC Disbursements owing to, each
Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive absent clearly demonstrable error,
and the Borrower and each Credit Party may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Credit Agreement, notwithstanding notice to the contrary.
The Register shall be available for inspection by the Borrower and any Credit
Party, at any reasonable time and from time to time upon reasonable prior
notice.
- 81 -
<PAGE> 87
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Credit Agreement
unless it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower or any
Credit Party, sell participations to one or more banks or other entities (each
such bank or other entity being called a "Participant") in all or a portion of
such Lender's rights and obligations under the Loan Documents (including all or
a portion of its Commitment and the Loans and LC Disbursements owing to it),
provided that (i) such Lender's obligations under the Loan Documents shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) the Loan
Parties and the Credit Parties shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under the
Loan Documents. Any agreement or instrument pursuant to which a Lender sells
such a participation shall provide that such Lender shall retain the sole right
to enforce the Loan Documents and to approve any amendment, modification or
waiver of any provision of any Loan Documents, provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 10.2(b) that affects such Participant. Subject to
paragraph (f) of this Section, the Borrower agrees that each Participant shall
be entitled to the benefits of Sections 3.5, 3.6 and 3.7 to the same extent as
if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 10.8 as though it were a
Lender, provided that such Participant agrees to be subject to Section 2.11(c)
as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 3.5 or 3.7 than the Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Borrower's prior
written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 3.7 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 3.7(e) as though
it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under the Loan Documents to secure
obligations of such
- 82 -
<PAGE> 88
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section shall not apply to any such pledge or assignment
of a security interest, provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations under the Loan
Documents or substitute any such pledgee or assignee for such Lender as a party
hereto.
Section 10.5 Survival
All covenants, agreements, representations and warranties made
by the Borrower herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Credit Agreement or any other
Loan Document shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of any Loan Document and the
making of any Loans and the issuance of any Letter of Credit, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that any Credit Party may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any LC Disbursement or any fee or any
other amount payable under the Loan Documents is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 3.5, 3.6, 3.7 and 10.3 and Article 9
shall survive and remain in full force and effect regardless of the consummation
of the transactions contemplated hereby, the repayment of the Loans and the LC
Disbursements, the expiration or termination of the Letters of Credit and the
termination of the Commitments or the termination of this Credit Agreement or
any provision hereof.
Section 10.6 Counterparts; Integration; Effectiveness
This Credit Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one contract. This Credit Agreement and any separate letter agreements with
respect to fees payable to any Credit Party constitute the entire contract among
the parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the subject
matter hereof. Except as provided in Section 5.1, this Credit Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Delivery of an executed
counterpart of this Credit Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart of this Credit
Agreement.
- 83 -
<PAGE> 89
Section 10.7 Severability
In the event any one or more of the provisions contained in
this Credit Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
Section 10.8 Right of Setoff
If an Event of Default shall have occurred and be continuing,
each of the Lenders and their respective Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by applicable law,
to setoff and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by it to or for the credit or the account of the Borrower against any of and all
the obligations of the Borrower now or hereafter existing under this Credit
Agreement held by it, irrespective of whether or not it shall have made any
demand under this Credit Agreement and although such obligations may be
unmatured. The rights of each of the Lenders and their respective Affiliates
under this Section are in addition to other rights and remedies (including other
rights of setoff) that it may have.
Section 10.9 Governing Law; Jurisdiction; Consent to Service
of Process
(a) This Credit Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Credit Agreement or the other Loan
Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that, to the extent
permitted by applicable law, all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by applicable law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Credit Agreement shall
affect any right that the Administrative Agent or
- 84 -
<PAGE> 90
any other Credit Party may otherwise have to bring any action or proceeding
relating to this Credit Agreement or the other Loan Documents against the
Borrower, or any of its property, in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Credit Agreement or the
other Loan Documents in any court referred to in paragraph (b) of this Section.
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) Each party to this Credit Agreement irrevocably consents
to service of process in the manner provided for notices in Section 10.1.
Nothing in this Credit Agreement will affect the right of any party to this
Credit Agreement to serve process in any other manner permitted by law.
Section 10.10 WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS CREDIT AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS CREDIT AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 10.11 Headings
Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Credit
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Credit Agreement.
Section 10.12 Interest Rate Limitation
Notwithstanding anything herein to the contrary, if at any
time the interest rate applicable to any Loan, together with all fees, charges
and other amounts that are treated as interest on such Loan under applicable law
(collectively the "charges"), shall
- 85 -
<PAGE> 91
exceed the maximum lawful rate (the "maximum rate") that may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all of the charges payable in respect thereof,
shall be limited to the maximum rate and, to the extent lawful, the interest and
the charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated, and the
interest and the charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the maximum rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.
Section 10.13 Treatment of Certain Information
Each Credit Party agrees to use reasonable precautions to keep
confidential, in accordance with their customary procedures for handling
confidential information of the same nature, all non-public information supplied
by the Borrower or any Subsidiary pursuant to this Credit Agreement which (a) is
clearly identified by such Person as being confidential at the time the same is
delivered to such Credit Party, or (b) constitutes any financial statement,
financial projections or forecasts, budget, compliance certificate, audit
report, management letter or accountants' certification delivered hereunder,
provided, however, that nothing herein shall limit the disclosure of any such
information (i) to such of their respective Related Parties as need to know such
information, (ii) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, or requested by any bank regulatory
authority, (iii) on a confidential basis, to prospective lenders or their
counsel, (iv) to auditors or accountants, and any analogous counterpart thereof,
(v) to any other Credit Party, (vi) in connection with any litigation to which
any one or more of the Credit Parties is a party, (vii) to the extent such
information (A) becomes publicly available other than as a result of a breach of
this Credit Agreement, (B) becomes available to any of the Credit Parties on a
non-confidential basis from a source other than the Borrower or any Subsidiary,
or (C) was available to the Credit Parties on a non-confidential basis prior to
its disclosure to any of them by the Borrower or any Subsidiary; and (viii) to
the extent the Borrower shall have consented to such disclosure in writing.
- 86 -
<PAGE> 92
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
THE BISYS GROUP, INC.
By: /s/ Dennis R. Sheehan
Name: Dennis R. Sheehan
Title: Executive Vice President and
Chief Financial Officer
<PAGE> 93
THE BISYS GROUP, INC.
CREDIT AGREEMENT
THE BANK OF NEW YORK, individually,
as Administrative Agent and
as Issuing Bank
By: /s/ Steven L. Wexler
Name: Steven L. Wexler
Title: Vice President
<PAGE> 94
THE BISYS GROUP, INC.
CREDIT AGREEMENT
THE CHASE MANHATTAN BANK, individually
and as co-agent
By: /s/ Leonard Noll
Name: Leonard Noll
Title: Vice President
<PAGE> 95
THE BISYS GROUP, INC.
CREDIT AGREEMENT
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as co-agent
By: /s/ Stephen E. McDonald
Name: /s/ Stephen E. McDonald
Title: First Vice President
<PAGE> 96
THE BISYS GROUP, INC.
CREDIT AGREEMENT
FIRST UNION NATIONAL BANK,
individually and as co-agent
By: /s/ John P. Longhine
Name: John P. Longhine
Title: Senior Vice President
<PAGE> 97
THE BISYS GROUP, INC.
CREDIT AGREEMENT
FLEET BANK, NATIONAL ASSOCIATION,
individually and as co-agent
By: /s/ Lucia D. Gibbons
Name: Lucia D. Gibbons
Title: Senior Vice President
<PAGE> 98
THE BISYS GROUP, INC.
CREDIT AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
By: /s/ J. Richard Bishop
Name: J. Richard Bishop
Title: Vice President
<PAGE> 99
THE BISYS GROUP, INC.
CREDIT AGREEMENT
SUNTRUST BANK, ATLANTA
By: /s/ W. David Wisdom
Name: W. David Wisdom
Title: Vice President
<PAGE> 100
THE BISYS GROUP, INC.
CREDIT AGREEMENT
WACHOVIA BANK, N.A.
By: /s/ M. Eugene Wood III
Name: M. Eugene Wood III
Title: Senior Vice President
<PAGE> 101
THE BISYS GROUP, INC.
CREDIT AGREEMENT
THE BANK OF NOVA SCOTIA
By: /s/ Stephen E. Lockhart
Name: Stephen E. Lockhart
Title: Vice President
<PAGE> 1
THE BISYS GROUP, INC. AND SUBSIDIARIES
Selected Financial Data
(in thousands, except per shore data)
The following data should be read in conjunction with the consolidated financial
statements and related notes thereto and management's discussion and analysis of
results of operations and financial condition included elsewhere in this annual
report.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
--------
FOR YEARS ENDED JUNE 30, 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Revenues $472,676 $386,344 $318,988 $247,061 $200,527
- -------------------------------------------------------------------------------------------------------
Operating costs and expenses:
Service and operating 266,800 221,767 170,717 131,708 105,163
General and administrative 69,696 58,061 54,638 39,980 46,953
Selling and conversion 22,509 17,064 12,410 9,248 8,988
Research and development 11,523 11,731 10,408 10,176 9,392
Amortization of intangibles 7,756 3,819 3,613 3,811 5,095
Merger expenses and other charges 400 11,998 1,500 22,250 28,340
Acquired in-process research
and development 19,000 -- -- -- --
- -------------------------------------------------------------------------------------------------------
Operating earnings (loss) 74,992 61,904 65,702 29,888 (3,404)
Interest (income) expense (1,200) (4,849) (2,216) (372) 649
- -------------------------------------------------------------------------------------------------------
Income (loss) before income tax provision 76,192 66,753 67,918 30,260 (4,053)
Income tax provision 38,076 26,729 27,167 12,236 2,431
- -------------------------------------------------------------------------------------------------------
Net income (loss) $ 38,116 $ 40,024 $ 40,751 $ 18,024 $ (6,484)
=======================================================================================================
Basic earnings (loss) per share $ 1.43 $ 1.52 $ 1.63 $ 0.76 $ (0.28)
Diluted earnings (loss) per shore $ 1.36 $ 1.46 $ 1.55 $ 0.72 $ (0.28)
=======================================================================================================
BALANCE SHEET DATA:
JUNE 30,
Working capital $ 22,084 $ 97,822 $ 87,641 $ 40,448 $ 5,326
Total assets 459,661 334,101 265,085 214,625 165,338
Long-term debt, including current maturities -- 1,702 1,668 1,974 8,405
Stockholders' equity 288,506 238,290 191,919 143,172 114,627
=======================================================================================================
--------
</TABLE>
18
<PAGE> 2
THE BISYS GROUP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Results of Operations and Financial Condition
The BISYS Group, Inc. and subsidiaries (the "Company") provides outsourcing
solutions to and through financial organizations. The following table presents
the percentage of revenues represented by each item in the Company's
consolidated statement of operations for the periods indicated:
<TABLE>
<CAPTION>
------
FOR YEARS ENDED JUNE 30, 1999 1998 1997
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------
Operating costs and expenses:
Service and operating 56.4 57.4 53.5
General and administrative 14.8 15.0 17.1
Selling and conversion 4.8 4.5 3.9
Research and development 2.4 3.0 3.3
Amortization of intangibles 1.6 1.0 1.1
Merger expenses and other charges 0.1 3.1 0.5
Acquired in-process research and development 4.0 -- --
- --------------------------------------------------------------------------------
Operating earnings 15.9 16.0 20.6
Interest income 0.3 1.3 0.7
- --------------------------------------------------------------------------------
Income before income tax provision 16.2 17.3 21.3
Income tax provision 8.1 6.9 8.5
- --------------------------------------------------------------------------------
Net income 8.1% 10.4% 12.8%
================================================================================
------
</TABLE>
Revenues increased $86.3 million in fiscal 1999 and $67.4 million in fiscal
1998, representing increases of 22.4% and 21.1%, respectively. Growth in fiscal
1999 and 1998 was derived from sales to new clients, existing client growth,
cross-sales to existing clients and revenues from acquired businesses, partially
offset by lost business. Revenue growth from acquired businesses approximated
$34.7 million in fiscal 1999 and $23.4 million in fiscal 1998.
Service and operating expenses increased $45.0 million in fiscal 1999 and $51.1
million in fiscal 1998, representing increases of 20.3% and 29.9%, respectively.
Service and operating expenses decreased as a percentage of revenues in fiscal
1999 by 1.0% to 56.4%, and increased by 3.9% to 57.4% in fiscal 1998. The dollar
increases resulted from additional costs associated with greater revenues.
General and administrative expenses increased $11.6 million, or 20.0%, and
decreased as a percentage of revenues by 0.2% to 14.8% in fiscal 1999 and
increased $3.4 million, or 6.3%, and decreased as a percentage of revenues by
2.1% to 15.0% in fiscal 1998. The dollar increase in fiscal 1999 and 1998
resulted from additional casts associated with greater revenues. The decrease as
a percentage of revenues resulted from further utilization of existing general
and administrative support resources.
Selling and conversion expenses increased $5.4 million, or 31.9%, and increased
as a percentage of revenues by 0.3% to 4.8% in fiscal 1999, and increased $4.7
million, or 37.5%, and increased as a percentage of revenues by 0.6% to 4.5% in
fiscal 1998. The increases in fiscal 1999 and 1998 resulted from added costs
associated with higher selling and conversion activities.
Research and development expenses decreased $0.2 million to $11.5 million, or
1.8%, in fiscal 1999 and decreased as a percentage of revenues by 0.6% to 2.4%.
In fiscal 1998 such expenses increased $1.3 million to $11.7 million, or 12.7%,
and decreased as percentage of revenues by 0.3% to 3.0%. The reduction in
percentage of revenues in both fiscal years was a result of acquiring and
merging with businesses which do not require substantial research and
development.
Amortization of intangible assets was $7.8 million in fiscal 1999, compared to
$3.8 million in fiscal 1998 and $3.6 million in fiscal 1997. The increase in
fiscal 1999 amortization was due to the higher level of intangible assets
associated with acquired businesses.
In fiscal 1999, the Company wrote off $19.0 million of acquired in-process
research and development associated with the acquisition of Greenway and
incurred $0.4 million of merger-related expenses.
In fiscal 1998, the Company recorded transaction-related charges of $5.3 million
related to the acquisitions of Charter Systems, Inc. (Charter), Dascit/White &
Winston and affiliated companies (DWW), and Benefit Services, Inc. (BSI).
Additionally, a one-time charge of $6.7 million was incurred to realign
operations primarily in connection with a client of the Company's Fund Services
division terminating its distribution and administration agreements.
19
<PAGE> 3
THE BISYS GROUP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Results of Operations and Financial Condition
In fiscal 1997, $1.5 million of additional commission charges were incurred as a
result of increased mutual fund assets serviced pursuant to the outsourcing
alliance with the mutual fund division of Furman Selz, LLC.
Operating earnings increased by $13.1 million to $75.0 million in fiscal 1999
and decreased as a percentage of revenues from 16.0% to 15.9%. The dollar
increase was primarily due to revenue gains and the synergies realized from
consolidation of acquired businesses. Operating earnings decreased by $3.8
million to $61.9 million in fiscal 1998, and decreased as a percentage of
revenues from 20.6% to 16.0%. The decreases were due to merger expenses and
other charges.
Interest income decreased $3.6 million to $1.2 million in fiscal 1999 and
increased $2.6 million to $4.8 million in fiscal 1998. The fiscal 1999 decrease
was due to lower levels of invested cash and higher interest expense associated
with short-term borrowings. The fiscal 1998 increase was due to higher average
invested balances of cash and cash equivalents.
The provision for income taxes increased to $38.1 million in fiscal 1999 from
$26.7 million in fiscal 1998 and decreased from $27.2 million in fiscal 1997.
Exclusive of the nonrecurring, nondeductible charge in fiscal 1999 of $19.0
million related to acquired in-process research and development, the fiscal 1999
provision for income taxes reflects an effective tax rate of 40%. The effective
tax rate was also 40% for both fiscal 1998 and 1997.
-------------------
Segment Information
The following table sets forth operating revenue and operating income by
business segment and for corporate operations for the years ended June 30, 1999,
1998, and 1997. Merger expenses and other charges and acquired in-process
research and development are separated from the operating results of the segment
for a better understanding of the underlying performance of each segment.
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
<S> <C> <C> <C>
Operating revenue:
Information Services $178,296 $151,372 $126,154
Investment Services 237,909 211,714 181,665
Insurance and
Education Services 56,471 23,258 11,169
- --------------------------------------------------------------------------------
Total operating
revenue $472,676 $386,344 $318,988
================================================================================
Operating income (loss):
Information Services $44,389 $34,320 $33,958
Investment Services 42,499 42,764 36,299
Insurance and
Education Services 19,353 7,502 4,197
Corporate (11,849) (10,684) (7,252)
- --------------------------------------------------------------------------------
Total operating
income $94,392 $73,902 $67,202
================================================================================
</TABLE>
Revenue in the Information Services business segment increased $26.9 million in
fiscal 1999 and $25.2 million in fiscal 1998, representing increases of 17.8%
and 20.0%, respectively. The revenue increase in fiscal 1999 was due to internal
growth and the acquisition of Greenway Corporation, while the increase in fiscal
1998 was due to internal growth and the acquisition of Charter Systems, Inc.
(Charter). Operating income in the Information Services business segment
increased $10.1 million in fiscal 1999 and $0.4 million in fiscal 1998,
resulting in operating margins of 24.9%, 22.7%, and 26.9% for fiscal 1999, 1998,
and 1997, respectively. Margins improved in fiscal 1999 primarily due to
accelerated growth within the Information Solutions division, while margins
decreased in fiscal 1998 due to lower margins in the Marketing Solutions
division and lower margins associated with the acquisition of Charter. The
Marketing Solutions division was sold in June 1999.
Revenue in the Investment Services business segment increased $26.2 million in
fiscal 1999 and $30.0 million in fiscal 1998, representing increases of 12.4%
and 16.5%, respectively. The revenue increase in fiscal 1999 was due to internal
growth and the acquisition of Brokerage Services, while the increase in fiscal
1998 was due to continued internal growth and a strong increase in the number of
plans administered by the Plan Services division. Operating income in the
Investment Services business segment decreased $0.3 million in fiscal 1999 and
increased $6.5 million in fiscal 1998, resulting in margins of 17.9%, 20.2%, and
20.0% in fiscal 1999, 1998, and 1997, respectively. Margins declined in fiscal
1999 primarily due to the acquisition of Brokerage Services and lower margins in
the Fund Services division as a result of costs incurred for the international
20
<PAGE> 4
expansion of outsourcing services, expansion of the business development sales
force and the full-year impact of the loss of a major client in September 1997.
Margins remained relatively constant in fiscal 1998 compared to fiscal 1997 as a
result of lower margins in the Fund Services division due to the loss of a
significant client, offset by higher margins within the Plan Services division.
Revenue in the Insurance and Education Services business segment increased $33.2
million in fiscal 1999 and $12.1 million in fiscal 1998, representing increases
of 142.8% and 108.2%, respectively. Revenue growth in fiscal 1999 and fiscal
1998 was attributable to internal growth and revenue from acquired businesses.
Operating income in the Insurance and Education Services business segment
increased $11.9 million in fiscal 1999 and $3.3 million in fiscal 1998,
resulting in margins of 34.3%, 32.3%, and 37.6% in fiscal 1999, 1998, and 1997,
respectively. Margins increased slightly in fiscal 1999 due to strong internal
growth combined with efficient integration of acquired businesses. Margins
declined in fiscal 1998 as the Company invested in the marketing and sales areas
to position the Insurance Services division for sustained growth.
Corporate operations represent charges for the Company's human resources, legal,
accounting and finance functions, and various other unallocated overhead
charges. Increased expenses of $1.2 million in fiscal 1999 were in line with the
Company's overall growth. Increased expenses of $3.4 million in fiscal 1998 were
due to additional staffing, office space, and computer equipment and software
required to expand the infrastructure in response to overall growth in the
business.
-------------------------------
Liquidity and Capital Resources
At June 30, 1999, the Company had cash and cash equivalents of $49.6
million and working capital of approximately $22.1 million. At June 30, 1999,
the Company had outstanding borrowings of $52.0 million against its revolving
credit facility to support working capital requirements. The credit facility
bears interest at LIBOR plus a margin of 0.625%, or 5.625% at June 30, 1999. At
June 30, 1999, the Company had $0.7 million outstanding in the form of letters
of credit.
Other current assets included in the accompanying balance sheet consist
primarily of prepaid expenses, inventory, and customer funds required to be
segregated that are held by the Company's Brokerage Services division that was
acquired in July 1998. Customer funds required to be segregated may vary
significantly from period to period and approximated $3.4 million at June 30,
1999.
For the year ended June 30, 1999, operating activities provided cash of $52.3
million, primarily as a result of net income of $38.1 million plus several
non-cash items including depreciation and amortization of $23.6 million,
deferred income taxes of $3.7 million and the write-off of acquired in-process
research and development of $19.0 million, offset by changes in net operating
assets and liabilities, net of effects from acquisitions, of $32.0 million.
These changes are a result of increases in accounts receivable due to revenue
growth and reduction in accrued liabilities due largely to payments associated
with client marketing programs that are administered by the Company's Fund
Services division. Investing activities used cash of $91.1 million, primarily
for the acquisition of businesses of $64.8 million, and capital expenditures of
$27.7 million, offset by cash acquired in acquisitions of $9.5 million.
Financing activities used cash of $5.0 million primarily for the repurchase of
common stock of $70.4 million offset by net borrowings of $52.0 million and
$11.3 million of proceeds from the exercise of stock options.
For the years ended June 30, 1998 and 1997, operating activities provided cash
of $62.6 million and $46.3 million, respectively. Investing activities used cash
of $50.3 million and $11.8 million in fiscal years 1998 and 1997, respectively,
and financing activities provided cash of $1.2 million and $6.2 million,
respectively.
The Company's strategy includes the acquisition of complementary businesses
financed by a combination of internally generated funds, borrowings from the
revolving credit facility and common stock. The Company's policy is to retain
earnings to support future business opportunities, rather than to pay dividends.
In January 1999, the Company's Board of Directors authorized a new stock
buy-back program of up to $100 million of its outstanding common stock.
Purchases will occur from time to time in the open market to offset the possible
dilutive effect of shares to be issued under employee benefit plans, for
possible use in future acquisitions, and for general and other corporate
purposes. This new program supercedes and replaces the share repurchase program
previously authorized by the Board of Directors.
Under the Company's stock buy-back programs, the Company has purchased
approximately 1.6 million shares of its common stock during fiscal year 1999 for
approximately $70.4 million in order to effect the acquisitions of Greenway
Corporation (Greenway), EXAMCO, Inc. (EXAMCO), and Dover International (Dover),
and for issuance of stock in connection with the exercise of stock options.
Since January 1999, the Company has purchased 358,000 shares of its common stock
under the new stock buy-back program for approximately $19.4 million.
-------------------
Acquired In-Process
Research and Development
In September 1998, the Company acquired Greenway through the issuance of
common stock
21
<PAGE> 5
THE BISYS GROUP, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Results of Operations and Financial Condition
valued at approximately $43.8 million. Of the total purchase price, $19.0
million was allocated to acquired in-process research and development, which was
charged to operations at the time of acquisition.
The amount allocated to acquired in-process research and development was based
on an independent appraisal, employing a discounted cash flow approach, and
relates to the development of enhanced check imaging software. At the
acquisition date, the products were estimated to be between 50% and 75%
complete, and were determined to have no future alternative uses.
Significant assumptions used in the valuation of the acquired in-process
research and development were as follows:
<TABLE>
<S> <C>
Estimated costs to complete $2.1 million
Anticipated completion date January 2000
Projected annual revenues $30 million
Discount rate 20%
Discount period 9 years
</TABLE>
Currently, the development efforts are proceeding ahead of schedule.
Technological feasibility was attained in the third quarter of fiscal 1999, and
it is anticipated that development efforts will be completed by the end of the
first quarter of fiscal 2000.
Research and development expenditures related to this product development
effort, prior to attaining technological feasibility, approximated $500,000 for
the year ended June 30, 1999, and are included in the consolidated statement of
operations.
---------
Year 2000
The Company is addressing the Year 2000 issues associated with its
existing computer systems and software applications utilizing both internal and
external resources to identify and remediate these matters throughout the
organization. The Company has completed its risk assessment and testing plans
for internal mission critical information systems and continues to remediate
other systems that are not currently Year 2000 ready. The Company has tested
substantially all of its internal mission critical information systems and
believes such systems are Year 2000 ready. In the event such systems are not
Year 2000 ready by December 31, 1999, it could have a material adverse impact on
the Company's business and results of operation.
The Company uses third-party provided software and systems in certain of its
businesses for such tasks as account and information statement processing, fund
accounting, and 401(k) plan record-keeping. If third parties upon which the
Company depends, including telecommunications and electrical power providers,
ore unable to address their Year 2000 issues in a timely manner, it could result
in a material adverse financial risk to the Company. In order to minimize this
risk, the Company has devoted resources necessary to develop appropriate
business continuity plans. These contingency plans include alternative systems
and vendors, disaster recovery hot sites, alternative power sources, and manual
processes. Such contingency plans have been substantially completed.
The Company's Year 2000 progress, the testing of remediated software, and
contingency plans have been and will continue to be the subject of independent
verification and validation by the Company's Internal Audit function. Internal
Audit reports on Year 2000 are reviewed by senior management and the Company's
Board of Directors.
The Company believes it has developed an effective plan to address the Year 2000
issues and that, based on available information, its Year 2000 transition will
not have a material effect on its businesses, operations, or financial results.
The Company has incurred expenditures for Year 2000 testing and remediation of
approximately $3.0 million in fiscal 1999 and $3.0 million in fiscal 1998. The
Company anticipates expenditures for Year 2000 of approximately $1.2 million in
the first half of fiscal 2000.
---------------------------------------
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995
Except for the historical information contained herein, the matters
discussed in this annual report are forward-looking statements which involve
risks and uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, services and related products, prices, and other factors discussed in
the Company's prior filings with the Securities and Exchange Commission.
Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate. Therefore, there can be no assurance that the
forward-looking statements included in this annual report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
22
<PAGE> 6
THE BISYS GROUP, INC. AND SUBSIDIARIES
Management's Statement of Responsibility
The management of the Company assumes responsibility for the integrity and
objectivity of the information in the fiscal 1999 Annual Report. The information
was prepared in conformity with generally accepted accounting principles and
reflects the best judgment of management.
To provide reasonable assurance that transactions authorized by management are
recorded and reported properly and that assets are safeguarded, the Company
maintains a system of internal controls. The concept of reasonable assurance
implies that the cost of such a system is weighed against the benefits to be
derived therefrom.
PricewaterhouseCoopers LLP, independent accountants, audits the financial
statements of the Company in accordance with generally accepted auditing
standards. Such audit considers the Company's internal control structure and
includes a communication of recommendations for improvements in the Company's
internal control structure.
The Audit Committee of the Board of Directors ensures that management is
properly discharging its financial reporting responsibilities. In performing
this function, the Committee meets with management and the independent
accountants throughout the year. Additional access to the Committee is provided
to the independent accountants on an unrestricted basis, allowing discussion of
audit results, internal accounting controls, and financial reporting.
/s/ Lynn J. Mangum
LYNN J. MANGUM
Chairman and
Chief Executive Officer
Report of Independent Accountants
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE BISYS GROUP, INC.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of The BISYS
Group, Inc. and its subsidiaries at June 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1999 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
August 6, 1999
23
<PAGE> 7
THE BISYS GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
--------
FOR YEARS ENDED JUNE 30, 1999 1998 1997
<S> <C> <C> <C>
Revenues $472,676 $386,344 $318,988
- --------------------------------------------------------------------------------
Operating costs and expenses:
Service and operating 266,800 221,767 170,717
General and administrative 69,696 58,061 54,638
Selling and conversion 22,509 17,064 12,410
Research and development 11,523 11,731 10,408
Amortization of intangibles 7,756 3,819 3,613
Merger expenses and other charges 400 11,998 1,500
Acquired in-process research and development 19,000 -- --
- --------------------------------------------------------------------------------
Operating earnings 74,992 61,904 65,702
Interest income 1,200 4,849 2,216
- --------------------------------------------------------------------------------
Income before income tax provision 76,192 66,753 67,918
Income tax provision 38,076 26,729 27,167
- --------------------------------------------------------------------------------
Net income 38,116 $ 40,024 $ 40,751
================================================================================
Basic earnings per share $ 1.43 $ 1.52 $ 1.63
Diluted earnings per share $ 1.36 $ 1.46 $ 1.55
================================================================================
--------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE> 8
THE BISYS GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands, except share data)
<TABLE>
<CAPTION>
--------
JUNE 30, 1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 49,589 $ 93,403
Accounts receivable, net 104,608 73,693
Deferred tax asset 9,241 4,660
Other current assets 14,243 8,484
- -----------------------------------------------------------------------------------
Total current assets 177,681 180,240
Property and equipment, net 54,855 37,478
Intangible assets, net 194,852 102,663
Other assets 32,273 13,720
- -----------------------------------------------------------------------------------
Total assets $459,661 $334,101
===================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ -- $ 124
Short-term borrowings 52,000 --
Accounts payable 21,303 11,626
Accrued liabilities 82,294 70,668
- -----------------------------------------------------------------------------------
Total current liabilities 155,597 82,418
Long-term debt -- 1,578
Deferred tax liability 9,774 10,451
Other liabilities 5,784 1,364
- -----------------------------------------------------------------------------------
Total liabilities 171,155 95,811
- -----------------------------------------------------------------------------------
Commitments and contingencies (Note 6)
STOCKHOLDERS' EQUITY
Common stock, $0.02 par value, 80,000,000 shares authorized,
27,091,270 and 26,670,388 shares issued at June 30, 1999
and 1998, respectively 542 533
Additional paid-in capital 193,500 173,683
Retained earnings 94,550 66,229
Less treasury stock at cost, 1,575 shares and 57,895 shares
at June 30, 1999 and 1998, respectively (86) (2,155)
- -----------------------------------------------------------------------------------
Total stockholders' equity 288,506 238,290
- -----------------------------------------------------------------------------------
Total liabilities and stockholders' equity $459,661 $334,101
===================================================================================
--------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE> 9
THE BISYS GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
--------
FOR YEARS ENDED JUNE 30, 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 38,116 $ 40,024 $ 40,751
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 23,558 14,836 11,759
Loss on disposition or write-down of property and equipment -- 2,684 --
Write-off of acquired in-process research and development 19,000 -- --
Deferred income tax provision 3,673 4,515 8,511
Change in assets and liabilities, net of effects from acquisitions:
Accounts receivable, net (26,457) (8,103) (11,801)
Other current assets (2,799) (1,477) (2,411)
Other assets (6,800) (1,813) (1,158)
Accounts payable 5,140 148 617
Accrued liabilities and other (1,131) 11,805 73
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 52,300 62,619 46,341
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses (64,803) (29,250) --
Net cash acquired in acquisitions and dispositions 9,455 2,683 3,827
Capital expenditures (27,740) (16,930) (15,974)
Change in other investments (6,871) (6,571) (3,000)
Proceeds from sales and maturities of investments -- 1,365 3,523
Purchase of intangible assets (1,183) (1,621) (208)
- ------------------------------------------------------------------------------------------------------
Net cash used by investing activities (91,142) (50,324) (11,832)
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 77,000 -- --
Repayment of short-term borrowings (25,000) -- --
Repayment of debt (1,093) (2,150) (306)
Exercise of stock options 11,316 12,229 5,385
Issuance of common stock 3,218 1,369 1,079
Repurchases of common stock (70,413) (10,291) --
- ------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (4,972) 1,157 6,158
- ------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (43,814) 13,452 40,667
Cash and cash equivalents at beginning of year 93,403 79,951 39,284
- ------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 49,589 $ 93,403 $ 79,951
======================================================================================================
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for:
Interest $ 1,158 $ 338 $ 335
Income taxes $ 27,172 $ 19,432 $ 14,249
======================================================================================================
--------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26
<PAGE> 10
THE BISYS GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of
Stockholders' Equity
(in thousands)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS
FOR YEARS ENDED JUNE 30, 1997, COMMON STOCK PAID-IN (ACCUMULATED TREASURY STOCK
1998 AND 1999 SHARES AMOUNT CAPITAL DEFICIT) SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1996 24,782 $ 496 $145,788 $ (3,112) -- $ --
=============================================================================================================
Exercise of stock options 412 8 5,377 -- -- --
Tax benefit of stock options exercised -- -- 1,532 -- -- --
Issuance of common stock 41 1 1,078 -- -- --
Net income -- -- -- 40,751 -- --
- -------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1997 25,235 505 153,775 37,639 -- --
=============================================================================================================
Exercise of stock options 592 12 9,391 (4,965) (217) 8,136
Tax benefit of stock options exercised -- -- 4,607 -- -- --
Issuance of common stock 48 1 1,368 -- -- --
Common stock issued in acquisitions 795 15 4,542 (6,469) -- --
Repurchases of common stock -- -- -- -- 275 (10,291)
Net income -- -- -- 40,024 -- --
- -------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1998 26,670 533 173,683 66,229 58 (2,155)
=============================================================================================================
Exercise of stock options 361 7 5,729 (7,135) (297) 12,787
Tax benefit of stock options exercised -- -- 5,458 -- -- --
Issuance of common stock 60 2 3,216 -- -- --
Common stock issued in acquisitions -- -- 5,414 (2,660) (1,314) 59,695
Repurchases of common stock -- -- -- -- 1,555 (70,413)
Net income -- -- -- 38,116 -- --
- -------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1999 27,091 $ 542 $193,500 $ 94,550 2 $ (86)
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
27
<PAGE> 11
THE BISYS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Basis of Presentation and Summary of Significant Accounting Policies
The Company
The BISYS Group, Inc. and subsidiaries ("BISYS" or the "Company") is a
leading national provider of outsourcing solutions to and through financial
organizations.
Basis of Presentation
The consolidated financial statements include the accounts of The BISYS
Group, Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid debt instruments purchased
with original maturities of three months or less, including $9.9 million and
$42.3 million of overnight repurchase agreements at June 30, 1999 and 1998,
respectively. The Company maintains cash deposits in banks which from time to
time exceed the amount of deposit insurance available. Management periodically
assesses the financial condition of the institutions and believes that any
potential credit loss is minimal.
Short-term Investments
Management determines the appropriate classification of investments in
debt and equity securities at the time of purchase. Marketable debt and equity
securities available for sale are carried at market based upon quoted market
prices. Unrealized gains or losses on available for sale securities are
accumulated as an adjustment to stockholders' equity, net of related deferred
income taxes. Realized gains or losses are computed based on specific
identification of the securities sold. Realized and gross unrealized gains and
losses on short-term investments were not significant for the years ended June
30, 1999, 1998 and 1997.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight line method over the estimated useful lives of
the assets as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
(YEARS)
<S> <C>
Buildings and leasehold improvements 5 - 40
Data processing equipment and systems 2 - 5
Furniture and fixtures 3 - 12
Software development costs 3 - 5
================================================================================
</TABLE>
Depreciation expense for the years ended June 30, 1999, 1998 and 1997 was
$15,804,000, $11,092,000 and $8,146,000, respectively.
Expenditures for major renewals and improvements are capitalized, while minor
replacements, maintenance and repairs which do not improve or extend the life of
such assets are charged to expense as incurred. Disposals are removed at cost
less accumulated depreciation with the resulting gain or loss being reflected in
operations.
Intangible Assets
Intangible assets are amortized on a straight line basis over the
estimated useful lives as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
(YEARS)
<S> <C>
Cast in excess of net assets acquired 10 - 40
Customer relationships 25 - 30
Other 3 - 10
================================================================================
</TABLE>
The Company evaluates, for impairment, the carrying value of intangible assets
by comparing the carrying value of intangible assets including goodwill, to the
anticipated future undiscounted cash flows from the businesses whose acquisition
gave rise to the asset. If an intangible asset is impaired, the asset is written
down to fair value. Intangible assets resulting from acquired customer
relationships are evaluated in light of actual customer attrition rates to
ensure that the carrying value of these intangible assets is recoverable.
Impairment of Long-Lived Assets
The Company periodically assesses the likelihood of recovering the cost of
long-lived assets based on its expectations of future profitability and
undiscounted cash flows of the related business operations. These factors, along
with management's plans with respect to the operations, are considered in
assessing the recoverability of property, equipment, and purchased intangibles.
28
<PAGE> 12
Software Costs
The Company charges to operations routine maintenance of software, design
costs and development costs incurred prior to the establishment of a product's
technological feasibility. Costs incurred subsequent to the establishment of a
product's technological feasibility are capitalized and amortized over the
expected useful life of the related product. For the years ended June 30, 1998
and 1997, the Company did not capitalize any internal costs related to the
development of new software. For the year ended June 30, 1999, the Company
adopted the provisions of SOP 98-1 and capitalized certain internal costs
related to the development of internal use software. Year 2000 costs are
expensed as incurred and approximated $3.0 million in both fiscal 1999 and 1998.
Revenue Recognition
The Company records revenue as earned as evidenced by contracts or
invoices for its services at prices established by contract, price list and/or
fee schedule less applicable discounts. The Company is generally not subject to
returns in its businesses. Revenues from the sales of software are recognized in
accordance with the AICPA's Statement of Position 97-2, "Software Revenue
Recognition." Maintenance fee revenue is recognized ratably over the term of the
related support period, generally twelve months. Consulting revenue is
recognized principally on a percentage of completion basis and training revenue
is recognized upon delivery of the related service.
Accounts Receivable
A majority of the Company's receivables are from financial institutions
and investment companies which approximated $51.3 million and $22.6 million,
respectively, at June 30, 1999. The Company performs ongoing credit evaluations
of its customers and generally does not require collateral for accounts
receivable. Bad debt expense for the years ended June 30, 1999, 1998 and 1997
approximated $2,331,000, $1,642,000, and $1,494,000, respectively. At June 30,
1999 and 1998, the Company's allowance for doubtful accounts was approximately
$5,477,000 and $2,969,000, respectively.
Per Share Data
Basic earnings per share is computed using the weighted average number of
common shares outstanding during each year presented. Diluted earnings per share
is computed using the weighted average number of common and dilutive common
equivalent shares outstanding during each year presented. Common equivalent
shares consist of stock options and are computed using the treasury stock
method.
Amounts utilized in per share computations are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1999 1998 1997
<S> <C> <C> <C>
Weighted average common
shares outstanding 26,696 26,313 25,038
Assumed conversion of
common shares issuable
under stock option plan 1,240 1,034 1,319
- --------------------------------------------------------------------------------
Weighted average common
and common equivalent
shares outstanding 27,936 27,347 26,357
================================================================================
</TABLE>
Options to purchase 394,279 shares of common stock at various prices ranging
from $52.17 to $58.94 were outstanding at June 30, 1999, but were not included
in the computation of diluted EPS because the options' exercise prices were
greater than the average market price of common shares.
Stock-Based Compensation
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its stock-based
compensation plans.
Income Taxes
The liability method is used in accounting for income taxes whereby
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws.
Reclassification
Certain reclassifications have been made to the 1997 and 1998 consolidated
financial statements to conform to the 1999 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. The most significant estimates are related to the allowance for doubtful
accounts, intangible assets, merger expenses and other charges, acquired
in-process research and development, income taxes and contingencies. It is
reasonably possible that actual results could differ from these estimates in the
near term.
29
<PAGE> 13
THE BISYS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Disclosure Regarding Financial Instruments
For all financial instruments, including cash and cash equivalents,
receivables and accounts payable, the carrying value is considered to
approximate fair value.
New Accounting Standards
In fiscal 1999, the Company adopted the provisions of FAS 131 "Disclosures
about Segments of an Enterprise and Related Information." FAS 131 specifies
revised guidelines for determining an entity's operating segments and the type
and level of financial information to be disclosed.
The American Institute of Certified Public Accountants issued Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" (SOP 98-1). The SOP is effective for financial
statements for fiscal years beginning after December 15, 1998 with earlier
application permitted. The provisions of SOP 98-1 require the Company to
capitalize certain internal costs related to development of internal use
software that have previously been expensed as incurred. The Company adopted the
SOP in the first quarter of fiscal 1999, the impact of which was not material to
the Company's financial position or results of operations.
2. Business Combinations
On September 16, 1998, the Company completed its acquisition of Greenway
Corporation (Greenway) through the issuance of 968,202 shares of BISYS common
stock held in treasury and issuance of 148,795 equivalent stock options for all
of the outstanding shares and stock options of Greenway. The acquisition, valued
at approximately $43.8 million, was treated as a purchase for accounting
purposes, and, accordingly, the assets and liabilities were recorded based on
their fair values at the date of the acquisition. Of the total purchase price,
$15.6 million was allocated to goodwill, $7.4 million to other identifiable
intangible assets, and $1.8 million to net tangible assets. In addition, $19.0
million was allocated to acquired in-process research and development, which was
charged to operations at the time of the acquisition.
In addition to Greenway, the Company also completed the following purchase
acquisitions of businesses and assets in fiscal years 1999 and 1998. The
acquisitions set forth below have been accounted for as purchases and,
accordingly, the operations of the acquired companies are included in the
consolidated financial statements since the dates of acquisition. Pro forma
information has not been presented due to lack of materiality.
<TABLE>
<CAPTION>
BUSINESS DATE ACQUIRED NATURE OF BUSINESS CONSIDERATION
===================================================================================================
<S> <C> <C> <C>
Underwriters Service Agency May 1998 Life insurance distribution Cash for stock
and affiliates (USA)
CoreLink Resources, Inc. July 1998 Brokerage services Cash for stock
(CoreLink)
Potomac Insurance Marketing August 1998 Life insurance distribution Cash for stock
Group, Inc. (Potomac)
EXAMCO, Inc. (EXAMCO) April 1999 Education services Cash and stock
for stock
Poage Insurance Services April 1999 Life insurance distribution Cash for stock
(Poage)
Dover International (Dover) May 1999 Education and Cash and stock
support service for stock
Retained Asset Account Services June 1999 Financial processing Cash for assets
(RAA) services
- ---------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 14
On September 16, 1997, the Company merged with Benefit Services, Inc. (BSI) by
exchanging 71,448 shares of BISYS common stock for all the outstanding shares of
BSI.
On August 29, 1997, the Company merged with Dascit/White & Winston and
affiliated companies (DWW) by exchanging 134,396 shares of BISYS common stock
for all the outstanding stock of DWW.
On August 15, 1997, the Company merged with Charter Systems, Inc. (Charter), now
known as BISYS Networking Services, by exchanging 588,945 shares of BISYS common
stock and 258,605 BISYS equivalent stock options for all the outstanding shares
and stock options of Charter.
The acquisitions of Charter, DWW and BSI have been accounted for as poolings of
interests, although historical financial statements have not been restated due
to immateriality. The acquired companies' results of operations have been
included in BISYS' results of operations effective July 1, 1997. The Company
incurred a pre-tax charge of $5,263,000 for the year ended June 30, 1998 for
costs associated with these mergers (see Note 9).
3. Detail of Certain Financial Statement Accounts
(in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Property and equipment, net:
Land $ 120 $ 271
Buildings and leasehold improvements 8,201 7,441
Data processing equipment
and systems 43,390 31,848
Furniture and fixtures 20,520 14,952
Software development costs 33,450 20,798
- --------------------------------------------------------------------------------
105,681 75,310
Less: accumulated depreciation
and amortization (50,826) (37,832)
- --------------------------------------------------------------------------------
$ 54,855 $ 37,478
================================================================================
Intangible assets, net:
Cost in excess of net
assets acquired $171,833 $ 87,991
Customer relationships 31,675 31,725
Other 17,384 1,426
- --------------------------------------------------------------------------------
220,892 121,142
Less: accumulated amortization (26,040) (18,479)
- --------------------------------------------------------------------------------
$194,852 $102,663
================================================================================
Accrued liabilities:
Compensation $ 15,556 $ 11,266
Deferred income 12,523 10,593
Income taxes 3,809 1,600
Marketing 17,868 27,429
Other 32,538 19,780
- --------------------------------------------------------------------------------
$ 82,294 $ 70,668
================================================================================
</TABLE>
4. Borrowings
The Company has a $200 million senior unsecured revolving credit facility
(including a $20 million letter of credit subfacility) with its banks to support
working capital requirements and fund the Company's future acquisitions. The
facility expires June 30, 2004.
Outstanding borrowings under the credit facility bear interest at prime or, at
the company's option, LIBOR plus a margin not to exceed 1.325% based upon the
ratio of the Company's consolidated indebtedness to consolidated earnings before
interest, taxes, depreciation, and amortization (the "Pricing Formula"). The
credit agreement requires the Company to pay an agent fee of $25,000 per year
and an annual facility fee of 0.20%, or $400,000. The facility is guaranteed by
all subsidiaries of The BISYS Group, Inc. (except for broker/dealer, insurance,
foreign, and non-operating affiliates).
The credit agreement requires, among other things, the Company to maintain
certain financial covenants and limits the Company's ability to incur additional
indebtedness and to pay dividends. As of June 30, 1999, no amounts were
permitted for the payment of cash dividends.
The Company can borrow under the facility through June 2004 up to $200 million,
reduced by any outstanding letters of credit ($678,000 at June 30, 1999).
Interest is payable quarterly for prime rate borrowings or at maturity for LIBOR
borrowings, which range from 30-180 days. At June 30, 1999, the Company had
outstanding borrowings of $52 million bearing interest at LIBOR plus a margin of
0.625% (5.625% at June 30, 1999).
At June 30, 1998, long-term debt consisted primarily of mortgage notes payable
collateralized by real estate. During fiscal year 1999, the real estate was
sold, and the mortgage notes were assumed by the buyer.
5. Income Taxes
The significant components of the Company's net deferred tax asset (liability)
as of June 30, 1999 and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Tax effects of:
Property and equipment $ (4,106) $ (724)
Accrued liabilities 7,687 4,541
Accounts receivable 1,324 118
Tax carryforwards 4,061 962
Other 450 327
- --------------------------------------------------------------------------------
Deferred tax asset 9,416 5,224
Less valuation allowance (648) (857)
- --------------------------------------------------------------------------------
Net deferred tax asset 8,768 4,367
Deferred tax liability - identifiable
intangible assets (9,301) (10,158)
- --------------------------------------------------------------------------------
Deferred income taxes,
net (liability) asset $ (533) $ (5,791)
================================================================================
</TABLE>
31
<PAGE> 15
THE BISYS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At June 30, 1999 the Company had $4,061,000 of federal and state net operating
loss carryforwards available, expiring in fiscal 2003 to fiscal 2018.
The Company periodically evaluates the deferred tax asset and adjusts the
related valuation allowance on the deferred tax asset to an amount which is more
likely than not to be realized through future taxable income.
The components of the income tax provision for the years ended June 30, 1999,
1998, and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Deferred federal
tax expense $ 3,156 $ 3,867 $ 7,428
Current federal tax expense 29,044 17,988 15,731
Deferred state tax expense 517 648 1,083
Current state tax expense 4,926 4,226 2,925
Foreign tax expense 433 -- --
- --------------------------------------------------------------------------------
$38,076 $26,729 $27,167
================================================================================
</TABLE>
A reconciliation of the Company's income tax provision and the amount computed
by applying the statutory federal income tax rate to income before income tax
provision for the years ended June 30, 1999, 1998 and 1997 is as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Federal income tax
at statutory rate $26,667 $23,364 $23,772
Amortization and charge-off of non-deductible
intangible assets 8,620 781 1,195
Change in valuation allowance (209) (462) --
State taxes 2,985 3,091 2,532
Other, net 13 (45) (332)
- -------------------------------------------------------------------------------
$38,076 $26,729 $27,167
===============================================================================
</TABLE>
6. Commitments and Contingencies
The Company leases various office space under noncancellable operating leases
with remaining terms of up to nine years. The Company also leases certain office
and computer equipment and software under operating leases expiring through
2004. Rental expense associated with these operating leases for the years ended
June 30, 1999, 1998 and 1997 were $20,164,000, $16,434,000, and $15,096,000,
respectively.
The future minimum rental payments under non-cancellable operating leases for
the years ending after June 30, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING
FISCAL YEAR LEASES
<S> <C>
2000 $18,239
2001 13,460
2002 9,961
2003 5,748
2004 4,392
Thereafter 9,488
- --------------------------------------------------------------------------------
$61,288
================================================================================
</TABLE>
The Company's broker/dealer subsidiaries are subject to the Uniform Net Capital
Rule of the Securities and Exchange Commission. At June 30, 1999, the aggregate
net capital of such subsidiaries was $9,533,000, exceeding the net capital
requirement by $6,974,000.
The Company is involved in litigation arising in the ordinary course of
business. Management believes that the Company has adequate defenses and/or
insurance coverage against litigation and that the outcome of these proceedings,
individually or in the aggregate, will not have a material adverse effect upon
the Company's financial position, results of operations, or cash flows.
7. Supplemental Cash Flow Information
In fiscal 1999, 1998 and 1997, the Company recorded a reduction to taxes
currently payable related to tax benefits associated with stock options of
approximately $5,458,000, $4,607,000, and $1,532,000 respectively, with a
corresponding increase to additional paid-in capital. These noncash transactions
have been excluded from the consolidated statement of cash flows.
During the years ended June 30, 1999, 1998 and 1997, the Company received
proceeds of $11,316,000, $12,229,000, and $5,385,000, respectively, and recorded
a deduction to deferred compensation of $72,000 in 1999 and $345,000 in 1998,
with offsetting increases in additional paid-in capital relating to the exercise
of stock options.
Net cash paid for acquisiton of businesses was comprised of the following for
the years ended June 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Fair value of
assets acquired $151,980 $ 30,454
Less: issuance of common
stock and stock options
pursuant to acquisitions (62,449) --
Liabilities assumed (24,728) (1,204)
- --------------------------------------------------------------------------------
Net cash paid $ 64,803 $ 29,250
================================================================================
</TABLE>
32
<PAGE> 16
8. Retirement Savings Plan
The Company has a contributory retirement and savings plan which covers all
employees and meets the requirements of Section 401(k) of the Internal Revenue
Code. Employees may contribute up to 15% of their compensation to the plan which
is matched 50% by the Company up to 6% of the employee's compensation not to
exceed $5,000.
The Company may, at the discretion of the Board of Directors, make additional
contributions to the plan. The Company's matching contribution vests 40% with
the employee after two years and 20% per year thereafter. The Company's expense
to match employee contributions for the years ended June 30, 1999, 1998 and
1997, was approximately $2,788,000, $2,253,000, and $1,511,000, respectively.
9. Merger Expenses and Other Charges
As discussed in Note 2, the Company wrote off $19.0 million of acquired
in-process research and development associated with the acquisition of Greenway
and incurred $0.4 million of merger-related expenses during fiscal 1999.
During fiscal 1998, the Company incurred a charge of $6,735,000 to realign
operations in conjunction with the termination of distribution and
administrative agreements with a client of the Company's Fund Services division.
As discussed in Note 2, the Company recorded a charge of $5,263,000 during
fiscal 1998 for costs associated with the mergers of Charter, DWW, and BSI.
In fiscal 1997, the Company incurred a commission charge of $1,500,000 as a
result of servicing additional mutual fund assets pursuant to an outsourcing
agreement with the mutual fund division of Furman Selz, LLC.
Total merger expenses and other charges recorded for the years ended June 30,
1999, 1998 and 1997 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Merger transaction expenses
(legal and financial) $ -- $ 1,805 $ --
Costs to combine or realign operations:
Compensation related 400 3,722 --
Facilities or systems related -- 4,868 --
Other -- 1,603 --
Commissions incurred in
connection with
outsourcing alliance -- -- 1,500
- --------------------------------------------------------------------------------
$ 400 $11,998 $ 1,500
================================================================================
</TABLE>
During the years ended June 30, 1999 and 1998, the following costs were paid or
charged against the merger related accruals (in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Merger transaction expenses $ -- $ 2,030
Commissions -- 1,315
Compensation related costs 741 3,801
Facilities or systems related costs 1,273 5,114
Other 1,393 484
- --------------------------------------------------------------------------------
$ 3,407 $12,744
================================================================================
</TABLE>
At June 30, 1999, $83,000 of estimated costs for merger expenses, and costs to
combine or realign operations are unpaid and included in accrued liabilities on
the accompanying balance sheet.
10. Shareholder Rights Plan
On May 7, 1997, the Board of Directors adopted a Shareholder Rights Plan and
declared a dividend distribution at the rate of one Right for each share of
common stock held of record as of the close of business on May 16, 1997 and for
each share of common stock issued thereafter up to the Distribution Date
(defined below).
Each Right entitles holders of common stock to buy one share of common stock of
the Company at an exercise price of $175.00. The Rights would be exercisable,
and would detach from the common stock (the "Distribution Date") only if a
person or group (i) were to acquire 15 percent or more of the outstanding shares
of common stock of the Company; (ii) were to announce a tender or exchange offer
that, if consummated, would result in a person or group beneficially owning 15
percent or more of the outstanding shares of common stock of the Company; (iii)
were declared by the Board to be an Adverse Person (as defined in the Plan) if
such person or group beneficially owns 10% or more of the outstanding shares of
common stock in the Company. In the event of any occurrence triggering the
Distribution Date, each Right would entitle the holder (other than such an
acquiring person or group) to purchase the outstanding shares of common stock of
the Company (or, in certain circumstances, common stock of the acquiring person)
with a value of twice the exercise price of the Rights upon payment of the
exercise price. The Company will be entitled to redeem the Rights at $0.0025 per
Right at any time. The Rights will expire at the close of business on May 16,
2007.
11. Stock Based Compensation Plans
The Company has stock option and restricted stock purchase plans which provide
for granting of options and/or restricted stock to certain employees and outside
directors. The options vest primarily over a five-year period at each
anniversary date of the grant. These options expire following termination of
employment or within ten years of the date of the grant, whichever comes first.
Pro forma disclosures are provided for fiscal 1999, 1998 and 1997 as if the
Company had adopted the cost recognition requirements of FAS 123
33
<PAGE> 17
THE BISYS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
"Accounting for Stock-based Compensation." At June 30, 1999, options to purchase
1,810,535 shares are available for grant under the plans.
The fair value of each stock option grant is estimated on the date of grant
using the Black-Scholes pricing model with the following assumptions for grants
in fiscal 1999, 1998 and 1997:
1) expected dividend yields of 0%, 2) risk-free interest rates ranging from
4.72% to 6.78%, 3) expected volatility of 35% in fiscal 1999 and 30% in fiscal
years 1998 and 1997, and 4) an expected option life of 5 years, 4 years and 5
years in fiscal 1999, 1998 and 1997, respectively. For the purpose of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period of 5 years for employees. Using these
assumptions, the weighted average fair value per option at date of grant for
options granted during fiscal 1999, 1998 and 1997 was $17.02, $10.25, and
$14.31, respectively.
Had compensation expense been recognized for the Company's stock-based
compensation plans in accordance with FAS 123, the pro forma net income and
earnings per share for the years ended June 30, 1999, 1998 and 1997 would have
been as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1999 1998 1997
Pro Forma Pro Forma Pro Forma
<S> <C> <C> <C>
Net income $31,023 $36,129 $38,072
Basic earnings
per share $ 1.18 $ 1.40 $ 1.54
Diluted earnings
per share $ 1.13 $ 1.34 $ 1.46
================================================================================
</TABLE>
The effect of applying FAS 123 for only option grants since fiscal 1996 may not
be representative of the pro forma impact in future years.
The following is a summary of stock option activity for the years ended June 30,
1999, 1998, and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 3,735,717 $28.00 3,441,628 $24.40 3,175,692 $20.10
Options assumed in acquisitions 164,570 $ 4.57 258,605 $ 3.24 -- --
Options granted 1,311,614 $47.39 1,542,994 $34.09 839,300 $35.82
Options exercised (658,499) $19.19 (808,985) $15.09 (411,931) $13.05
Options cancelled (348,881) $34.75 (698,525) $29.45 (161,433) $28.20
- -----------------------------------------------------------------------------------------------------
Outstanding at end of year 4,204,521 $33.96 3,735,717 $28.00 3,441,628 $24.40
=====================================================================================================
Exercisable at end of year 1,467,711 $23.27 1,196,740 $19.22 1,112,182 $15.70
=====================================================================================================
</TABLE>
The following summarizes information about the Company's stock options
outstanding at June 30, 1999:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
Exercise Remaining Life Exercise Price
Range of Exercise Prices Options Outstanding Price (in years) Exercisable of Exercisable
<S> <C> <C> <C> <C> <C>
$ 0.01-$10.00 294,507 $ 2.71 3.7 283,096 $ 2.61
$10.01-$20.00 319,184 $19.08 4.2 319,184 $19.09
$20.01-$30.00 509,200 $24.33 6.0 296,700 $24.12
$30.01-$40.00 1,874,016 $35.01 7.9 556,016 $35.19
$40.01-$50.00 813,335 $43.76 9.0 8,000 $44.50
$50.01-$60.00 394,279 $56.61 9.8 4,715 $52.17
===========================================================================================================
</TABLE>
34
<PAGE> 18
12. Business Segment Information
The Company is a leading provider of growth-enabling outsourcing solutions to
financial institutions and other financial organizations. In accordance with FAS
No. 131, "Disclosure About Segments of an Enterprise and Related Information,"
the Company's operations have been classified into three business segments:
Information Services, Investment Services, and Insurance and Education Services.
Summarized financial information by business segment and for corporate
operations for the years ended June 30, 1999, 1998 and 1997 is as follows (in
thousands):
<TABLE>
<CAPTION>
--------
1999 1998 1997
<S> <C> <C> <C>
Revenues:
Information Services $178,296 $151,372 $126,154
Investment Services 237,909 211,714 181,665
Insurance and Education Services 56,471 23,258 11,169
- -------------------------------------------------------------------------------
Total $472,676 $386,344 $318,988
===============================================================================
Operating earnings (loss):
Information Services $ 44,389 $ 34,320 $ 33,958
Investment Services 42,499 42,764 36,299
Insurance and Education Services 19,353 7,502 4,197
Corporate (11,849) (10,684) (7,252)
- -------------------------------------------------------------------------------
Total $ 94,392 $ 73,902 $ 67,202
===============================================================================
Assets:
Information Services $132,271 $151,213 $120,507
Investment Services 179,084 125,227 126,244
Insurance and Education Services 110,092 43,598 8,001
Corporate 38,214 15,467 10,782
Elimination of intercompany receivables -- (1,404) (449)
- -------------------------------------------------------------------------------
Total $459,661 $334,101 $265,085
===============================================================================
Depreciation and amortization expense:
Information Services $ 11,404 $ 8,273 $ 6,471
Investment Services 7,930 5,542 4,940
Insurance and Education Services 3,702 665 268
Corporate 522 356 80
- -------------------------------------------------------------------------------
Total $ 23,558 $ 14,836 $ 11,759
===============================================================================
Capital expenditures:
Information Services $ 10,063 $ 8,789 $ 11,554
Investment Services 14,006 5,415 3,097
Insurance and Education Services 3,444 2,631 263
Corporate 1,784 757 1,209
- -------------------------------------------------------------------------------
Total $ 29,297 $ 17,592 $ 16,123
===============================================================================
--------
</TABLE>
The following is a reconciliation of operating earnings to the Company's
consolidated total (in thousands):
<TABLE>
<CAPTION>
--------
1999 1998 1997
<S> <C> <C> <C>
Total operating earnings for reportable segments $ 94,392 $ 73,902 $ 67,202
Merger expenses and other charges (400) (11,998) (1,500)
Acquired in-process research and development (19,000) -- --
- -----------------------------------------------------------------------------------
Total operating earnings $ 74,992 $ 61,904 $ 65,702
===================================================================================
--------
</TABLE>
The net revenues of each segment are principally domestic, and no single
customer accounted for 10% or more of the consolidated revenues for the years
ended June 30, 1999, 1998, and 1997.
35
<PAGE> 19
THE BISYS GROUP, INC. AND SUBSIDIARIES
Market Price Information
(unaudited)
The following information relates to the Company's $0.02 par value common stock
which trades in the over-the-counter market and is quoted in the NASDAQ National
Market System under the symbol BSYS. Price information on the Company's common
stock is presented below:
<TABLE>
<CAPTION>
FISCAL 1999 -------------------
QUARTER ENDED HIGH LOW
<S> <C> <C>
September 30, 1998 $45 1/4 $36 3/4
December 31, 1998 51 5/8 38 3/8
March 31, 1999 58 1/2 47 1/8
June 30, 1999 59 19/32 50
================================================================================
-------------------
<CAPTION>
FISCAL 1998
QUARTER ENDED HIGH LOW
<S> <C> <C>
September 30, 1997 $42 $30 3/8
December 31, 1997 34 3/8 29 1/4
March 31, 1998 38 32 1/2
June 30, 1998 42 34 1/16
================================================================================
</TABLE>
At June 30, 1999, the Company's common stock was held by 817 stockholders of
record. It is estimated that an additional 4,500 stockholders own the Company's
common stock through nominee or street name accounts with brokers.
Consolidated Quarterly Results
(unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
------------------------------------------
FISCAL 1999
- ----------------------------------------------------------------------------------------
QUARTER ENDED SEP 30 DEC 31 MAR 31 JUN 30
<S> <C> <C> <C> <C>
Revenues $101,924 $111,958 $121,302 $137,492
Operating earnings (loss) (3,461) 20,108 27,014 31,331
Income (loss) before income tax provision (2,664) 20,351 27,331 31,174
Net income (loss) (9,199) 12,209 16,400 18,706
========================================================================================
Basic earnings (loss) per share $ (0.35) $ 0.46 $ 0.61 $ 0.69
Diluted earnings (loss) per share $ (0.35) $ 0.44 $ 0.58 $ 0.66
========================================================================================
------------------------------------------
<CAPTION>
FISCAL 1998
- ----------------------------------------------------------------------------------------
QUARTER ENDED SEP 30 DEC 31 MAR 31 JUN 30
<S> <C> <C> <C> <C>
Revenues $ 91,462 $ 91,431 $ 98,951 $104,500
Operating earnings 1,725 15,665 20,792 23,722
Income before income tax provision 2,750 16,690 22,220 25,093
Net income 1,623 10,014 13,332 15,055
========================================================================================
Basic earnings per share $ 0.06 $ 0.38 $ 0.51 $ 0.57
Diluted earnings per share $ 0.06 $ 0.37 $ 0.49 $ 0.55
========================================================================================
</TABLE>
36
<PAGE> 1
EXHIBIT 21 -- LIST OF SIGNIFICANT SUBSIDIARIES OF
THE BISYS GROUP, INC. AS OF SEPTEMBER 28, 1999
1. BISYS, Inc., a Delaware corporation
2. BISYS Plan Services, L.P., a Pennsylvania limited partnership
3. BISYS Research Services, Inc., a Delaware corporation
4. BISYS Fund Services, Inc., a Delaware corporation
5. Document Solutions, Inc., a Delaware corporation
6. Concord Holding Corporation, a Delaware corporation
7. BISYS Insurance Services, Inc., a Pennsylvania corporation
8. BISYS Networking Services, Inc., a Massachusetts corporation
9. BISYS Brokerage Services, Inc., a California corporation
10. BISYS Education Services, Inc., a Louisiana corporation
<PAGE> 1
EXHIBIT 23
PRICEWATERHOUSECOOPERS LLP
A professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
The BISYS Group, Inc., on Forms S-8 (File Nos. 33-91666, 33-91676, 333-02966,
333-39229, 333-39601, 333-43347, 333-43349, 333-43351, 333-65185 and 333-81683)
and in the Registration Statements of The BISYS Group, Inc. on Form S-3 (File
Nos. 333-37109, 333-64947, 333- 78003 and 333-81013) of our report dated August
6, 1999 on our audits of the consolidated financial statements of The BISYS
Group, Inc. and subsidiaries as of June 30, 1999 and 1998, and for each of the
three years in the period ended June 30, 1999, which report is incorporated by
reference in this Annual Report.
/S/ PricewaterhouseCoopers LLP
- ------------------------------
New York, New York
September 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE BISYS GROUP, INC. AND SUBSIDIARIES FOR
THE YEAR ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 49,589
<SECURITIES> 0
<RECEIVABLES> 110,085
<ALLOWANCES> 5,477
<INVENTORY> 0
<CURRENT-ASSETS> 177,681
<PP&E> 105,681
<DEPRECIATION> 50,826
<TOTAL-ASSETS> 459,661
<CURRENT-LIABILITIES> 155,597
<BONDS> 0
0
0
<COMMON> 542
<OTHER-SE> 287,964
<TOTAL-LIABILITY-AND-EQUITY> 459,661
<SALES> 0
<TOTAL-REVENUES> 472,676
<CGS> 0
<TOTAL-COSTS> 266,800
<OTHER-EXPENSES> 34,032
<LOSS-PROVISION> 2,331
<INTEREST-EXPENSE> 1,490
<INCOME-PRETAX> 76,192
<INCOME-TAX> 38,076
<INCOME-CONTINUING> 38,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,116
<EPS-BASIC> 1.43
<EPS-DILUTED> 1.36
</TABLE>
